Volatility reset

IV crush after earnings: what changes overnight

Implied volatility can fall after earnings because uncertainty has been removed. That repricing can hurt long premium positions even when the stock moves in the expected direction.

What to check

• Current IV versus recent history.
• Expected post-event volatility.
• Days to expiration after the report.
• Bid/ask spreads and exit liquidity.
• Whether the strategy buys premium, sells premium, or defines risk with spreads.

Example

If IV drops from 80% to 55%, the direction may be right while option value still falls. That is why the move and volatility assumptions both matter.

Primary reading: OIC options pricing overview · OIC long straddle strategy · Investor.gov options overview