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Catalysts
Trading Around Earnings
You can nail the direction of an earnings move and still lose money on the option. The culprit is IV crush.
NoVo Options Trading · 2026
Earnings are the ultimate binary event: a company reports, and the stock can gap violently in either direction. That uncertainty makes options expensive in the days before - and creates one of the most misunderstood traps in trading: the IV crush.
Why options inflate first
Because a big move is likely but the direction is unknown, demand for options surges before earnings, driving up implied volatility. Option prices bake in a large expected move. You are not just paying for direction - you are paying a premium for the uncertainty itself.
The crush
The instant earnings are released, the uncertainty resolves. Implied volatility collapses - often dramatically - because the big unknown is now known. An option that was pumped up on IV loses that inflated premium immediately. This is why a trader can be right on direction and still lose: the stock moved their way, but not enough to overcome the IV they paid for. The IV rank going in tells you how inflated you're paying.
Buy an option into earnings and you're not betting on the move. You're betting the move beats the price of the ticket.
The disciplined view
Earnings are closer to gambling than to a systematic edge - a binary bet where the house (IV) is stacked against the buyer. Many rules-based approaches avoid holding directional options through earnings entirely, or treat the event as a reason to reduce risk. Knowing why the option behaves the way it does is what separates an informed decision from a lottery ticket.
More on this: Earnings Season
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NoVo is a software tool for market analysis and for executing trades you initiate, not financial advice. This article is general education, not investment advice. Options trading involves substantial risk of loss, up to and including your entire capital. NoVo makes no guarantee of profit, win rate, or performance, and past results do not predict future outcomes. You are responsible for your own broker account, configuration, and trading decisions.