How Do News Events and Earnings Reports Affect Implied Volatility?
News events and earnings reports are major catalysts for increases in implied volatility. Because these events introduce significant uncertainty about a company's future performance and stock price, demand for options as a hedging or speculative tool surges.
This increased demand drives up option premiums, which in turn reflects a higher implied volatility. Traders anticipate a large price swing, though the direction is unknown.
After the news is released and the uncertainty is resolved, implied volatility typically drops sharply, an event known as "volatility crush."
Glossar
Earnings Reports
Disclosure ⎊ Cryptocurrency earnings reports, within the context of options trading and financial derivatives, represent formalized disclosures of operational and financial performance metrics specific to digital asset entities.
News Events
Impact ⎊ News events, within cryptocurrency, options, and derivatives, represent exogenous shocks altering price discovery and risk premia.
Implied Volatility
Expectation ⎊ This value represents the market's consensus forecast of future asset price fluctuation, derived by reversing option pricing models using current market premiums.