What Is “IV Crush” and When Does It Typically Occur in Crypto Options Trading?

"IV crush" (Implied Volatility crush) is a sharp and sudden drop in an option's implied volatility, which causes the option's premium (extrinsic value) to rapidly decrease. It typically occurs in crypto options trading immediately following a major, anticipated event, such as a protocol upgrade, a regulatory decision, or a scheduled token unlock.

Before the event, IV is high due to uncertainty; once the uncertainty is resolved, the market's expectation of future volatility plummets, leading to the crush.