IV and IV Crush
Implied volatility is the market's guess at how wild a stock will swing before your option expires — higher IV means pricier contracts because bigger swings = more ways to print. Say SPY's at $560 and a $565 call costs $3.00 when IV is 25%; if nothing changes except IV jumps to 35%, that same call might trade at $4.20 just because the market thinks a bigger move is coming.
IV crush is what happens after the event everyone was pricing in — usually earnings, but also Fed decisions or geopolitical headlines. The second the news drops, IV collapses because the uncertainty is gone. You can be dead right on direction and still lose money if crush eats more premium than the underlying move gave you.
The groups that survived last week's chaos weren't guessing which way crude or the indexes would break — they were trading the repricing itself. Circuit Breaker scalped tech on 0.52 NVDA IV because high premium means you can take profit on smaller moves before theta or crush shows up. Meanwhile longer-dated directional bets on SPY got cooked when geopolitical vol spiked then faded intraday, turning a correct put into a -93% time-stop.
