IV crush
IV crush is the drop in implied volatility right after a scheduled event. Options get cheaper on the spot, so a call can lose money even though the stock went up.
In depth
Implied volatility is the market's guess at how big the coming moves will be, and it is priced into every option. Before earnings nobody knows the number, so that guess runs high and options are expensive. The moment the report is out, the uncertainty is gone and the guess falls.
Say a call costs 4.00 the day before earnings. The stock opens up 3 percent, which sounds like a win, but implied volatility drops from 80 to 40 and the call is worth 3.20. You were right on direction and still down. The move had to beat the price you paid for the uncertainty.
Why it matters
Buying options into an event feels like the obvious trade and has some of the worst odds around. You are paying for a move the market has already priced in. If the stock does what you expected and no more, the drop in implied volatility takes the profit and you learn nothing about your read.
TraderLog does not store implied volatility per trade, but it does show the damage. Tag your earnings trades and the By tag table puts their win rate and average loser beside your normal setups. The calendar shows which days those results landed on.
Frequently asked questions
Implied volatility fell after the event, so every option got cheaper. The move was smaller than the price you paid for it.
Trade after the event rather than into it, or use a spread so you sell some of the expensive volatility too.
Keep your IV crush trades on the record in TraderLog
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