Monk Mode · Learn
IV Crush: right, and still wrong
“I was right but still lost.” It is the most common earnings-trade story, and it is not bad luck — it is mechanics. Step through a trade and watch implied volatility do the damage.
← All modulesThe setup: you buy an at-the-money call ($100.00 strike) the day before earnings, when implied volatility is high. Earnings hit, the stock moves your way — then IV collapses.
Premium paid
$4.46
Value after earnings
$5.55
Your P&L
+$1.08
How the pieces add up
The stock moved up 5% — to $105.00. Without an IV change, your call would be worth $7.21. But IV fell from 80% to 40%, and that collapse alone stripped out $1.66. Direction and time decay together moved you +$2.75; the IV crush is the part that turned a correct call into a loss.
Educational only. This shows the math and the honest odds — it is not a recommendation to make any trade, and it is not investment advice. All numbers are illustrative unless stated otherwise.