Quantifying the Crush

Volatility crush isn't a vague concept — it's measurable and somewhat predictable. The drop in IV after an event depends on how much IV inflated beforehand and where "normal" IV sits for that stock.

General formula: Post-event IV ≈ Pre-event IV × (1 - crush factor)

Crush factors typically range from 30% to 60%, depending on the stock and event type. A stock with pre-earnings IV of 60% and a 50% crush factor sees IV drop to about 30%.

Real-World Crush Examples

AAPL Earnings (typical):

  • Pre-earnings IV: 38%
  • Post-earnings IV: 22%
  • Crush: 42%
  • ATM straddle price drop: ~35%

    • TSLA Earnings (high-IV stock):

  • Pre-earnings IV: 75%
  • Post-earnings IV: 42%
  • Crush: 44%
  • ATM straddle price drop: ~40%

    • MRNA (biotech, FDA catalyst):

  • Pre-catalyst IV: 110%
  • Post-catalyst IV: 48%
  • Crush: 56%
  • ATM straddle price drop: ~55%

    • SPY (FOMC decision):

  • Pre-FOMC IV: 22%
  • Post-FOMC IV: 17%
  • Crush: 23%
  • ATM straddle price drop: ~15%

    • The pattern is clear: the higher the pre-event IV relative to normal IV, the larger the crush.

    How the Crush Affects Different Option Structures

    Not all positions are equally impacted:

    Most affected (high vega exposure):

  • Long single calls/puts — maximum exposure to IV decline
  • Long straddles/strangles — both legs suffer simultaneously
  • ATM options — highest vega, so highest dollar-for-dollar impact

    • Moderately affected:

  • Debit spreads — the long and short legs partially offset each other
  • Calendar spreads — the near-term option crushes harder, which actually helps if you're short the near-term

    • Least affected:

  • Deep ITM options — mostly intrinsic value, little vega
  • Credit spreads — you benefit from the crush on your short leg
  • Iron condors — both sides benefit from the premium collapse

    • Estimating Crush Before You Trade

    Step 1: Check the stock's current IV and its post-event IV from the last 4 quarters. Most platforms show historical IV charts.

    Step 2: Average the last 4 post-event IV levels. That's your estimated post-event IV.

    Step 3: Calculate the implied drop: (Current IV - Estimated Post-Event IV) / Current IV = Expected crush percentage.

    Step 4: Use the expected crush percentage to estimate how much your position will lose or gain from the IV change.

    | Stock | Current IV | Avg Post-Event IV | Expected Crush | AAPL40%22%45% NVDA55%30%45% META48%26%46% | XOM | 32% | 22% | 31% |

    The Vega Impact

    Every option has a vega value — the dollar change in option price per 1% change in IV. An option with $0.15 vega that experiences a 20-point IV drop loses:

    $0.15 × 20 = $3.00 per contract

    If you paid $5.00 for that option, $3.00 of the value evaporates from IV crush alone. The stock needs to move enough to generate $3.00+ in intrinsic value gains just to break even.

    This math is why buying single-leg options through earnings is so difficult. The IV crush headwind requires a massive directional move to overcome.

    Using Crush to Your Advantage

    As a seller: Enter credit positions 5-10 days before the event. Collect inflated premium. After the event, buy back at the crushed price. Your profit is the spread between entry and exit premium.

    As a buyer: Use spread structures to neutralize vega. A debit spread's long and short legs have opposing vega, so the net vega is much smaller. The directional component of your trade can then dominate.

    As a calendar trader: Sell the near-term option (higher crush) and own the longer-term option (less crush). The spread widens after the event.

    OptionsPilot's strike finder shows you real-time premiums so you can estimate the expected move and potential post-crush values before committing to a position around a volatility event.