What Is IV Crush?

What Is IV Crush?

Before we get to talking about what is IV crush, let’s understand what implied volatility is. It is a metric that is used to predict the likelihood of movement in security’s price, and can come in handy in projecting things such as future price moves, supply and demand, and pricing options contracts.

IV crush, on the other hand, is the name of the phenomenon in which the extrinsic value of an options contract makes a sharp decline following the occurrence of significant corporate events. The term is used by traders to describe a scenario in which IV, the implied volatility, decreases very quickly.

Now, is there a way you can stop IV crush? Of course, there is. You can do so by buying options when implied volatility is low or by selling the options around earnings. At all times, keep in mind that selling options is extremely risky. Having that said, IV crush is an indispensable part of options trading. Even though earnings volatility is a dynamic even with several moving parts, it definitely provides the vigilant traders with a number of opportunities to profit.

At OptionsGeek, you learn how the top 1% think about options, specifically, how they buy options. While they clearly understand the IV Crush phenomenon, most of them don’t spend too much time stressing about it. They focus more on the

Target Stock Price that may be hit after the earnings announcement, and then analyze the different option strikes to determine if they see an opportunity.

The Top 1% know that if they can get the Target Stock Price right AND choose the right option, the IV Crush won’t matter. Learn more about the best options trading strategy, IV crush, and a lot more terms and phenomenon related to options by visiting www.optionsgeek.com.