IV Crush Calculator
The reason people are right about direction and lose anyway. Drop implied volatility across the print, move the stock, and see what the option is actually worth on the other side.
With volatility falling from 80% to 40%, the stock has to move 5.6% up just to get you back to what you paid. The 5.0% move you entered is not enough — this is the “right on direction, still lost” case.
IV crush calculator, explained
What is IV crush?
Before a scheduled event, implied volatility is bid up because nobody knows the outcome. The moment it is announced the uncertainty is gone and volatility collapses — often 30 to 50% in a single session — regardless of which way the stock went. That collapse takes option value with it. More in the IV crush glossary entry.
How is this calculated?
A full Black-Scholes revaluation, not a vega approximation: the option is priced before at the elevated volatility, then repriced after at the lower one, one day closer to expiry, at the new stock price. Vega itself changes as volatility falls, so approximating with a single vega number understates the damage on exactly the trades where it matters most.
What should I put for “IV after”?
A reasonable default is the stock’s own baseline volatility in the weeks before the run-up — the level it was trading at before the event premium built. Roughly half the pre-event level is a common outcome for a liquid single name, but it varies with how much of the elevated volatility was event premium in the first place.
How do I avoid it?
Either be paid for it rather than paying it, or size for the fact that you need a move well beyond the break-even shown above. The implied vs. historical comparison on the Options Desk is the same question asked in advance: is the market charging more for this print than the stock has ever actually delivered?
Other calculators
Weekly options-market digest
Sundays. What moved this week, what catalysts and earnings drive next week, and which 5-pillar setups stand out.
Free. One email per week. Unsubscribe with one click.
Educational, not investment advice. These are standard models applied to the numbers you enter — they describe what the maths implies, not what the market will do.