Learn the IV crush around events — Hinglish notes

5.3.8 · Stock-Market › The Greeks

IV crush KYUN hota hai?

Key baat: stock price ka move karna aur IV ka change hona ek option par do alag forces hain. Aap direction mein sahi ho sakte ho aur phir bhi paisa gawa sakte ho kyunki IV move se zyada gir gayi.

IV precisely KYA hai?

Toh IV directly observe nahi hoti — yeh price se invert ki jaati hai: $Market Price = BS (σ_{IV}) \Rightarrow σ_{IV} = BS^{- 1} (Market Price)$

Ek event IV ko pump aur dump KAISE karta hai — Black–Scholes se derive karke

Ek at-the-money (ATM) call lo. Black–Scholes se $r = 0$ , $S = K$ (ATM), aur small time $T$ ke saath, price khoobsurti se simplify ho jaati hai.

Yeh kyun matter karta hai: Price directly $σ$ ke proportional hai. Agar IV half ho jaaye ( $σ \to σ /2$ ), toh ATM option apni half value kho deta hai — chahe $S$ kabhi move na kare. Yahi crush hai, ek line mein.

Figure — Learn the IV crush around events

P&L ko model KAISE karein: move vs. crush tug-of-war

Option value mein change do pieces mein split hota hai (first order): $Δ C \approx direction (delta) Δ_{opt} Δ S + IV crush (vega) V Δ σ$

jahaan Vega $V = \frac{\partial C}{\partial σ}$ hai. Hamare ATM formula se: $V_{ATM} = \frac{\partial}{\partial σ} (0.4 S σ T) = 0.4 S T$

Worked Examples

Worked example Example 1 — Long call, sahi direction, phir bhi loss

Stock $S=\$ 100 $, A T M c a l l,$ T = 1 $d in e a r nin g sse p e h l e$ = \tfrac{1}{252} $y r . P r e - e v e n t I V$ \sigma_0 = 80% $. P os t - e v e n t I V$ \sigma_1 = 40%$.

Pre price: $C_0 = 0.4(100)(0.80)\sqrt{1/252} = 0.4\cdot 100 \cdot 0.80 \cdot 0.063 = \$ 2.01 $. * Y e h s t e p k y u n ? * A T M a pp r o x ima t i o n u se k a r o;$ \sqrt{1/252}\approx0.063$.
Stock $\$ 102 $t ak ba d ha (a c hha, aa pl o n g t h e) . A T M k a D e l t a$ \approx 0.5 $, t o h d e l t a g ain$ \approx 0.5 \times 2 = $1.00 $. * K y u n ? *$ \Delta C_{\text{dir}} = \Delta \cdot \Delta S = 0.5\cdot 2$.
Lekin IV 40% tak crush ho gayi. Vega $= 0.4 \cdot 100 \cdot 0.063 = 2.52$ ; IV drop $= - 0.40$ . Vega loss $= 2.52 \times (-0.40) = -\$ 1.01 $. * K y u n ? *$ \Delta C_{\text{iv}} = \mathcal{V},\Delta\sigma$.
Net: $+1.00 - 1.01 \approx \$ 0$. Aapne direction sahi call ki aur kuch nahi kamaya. Yahi IV crush hai.

Common Mistakes (Steel-manned)

Active Recall

Recall Khud test karo (hidden)

IV scheduled event se pehle kyun badhti hai? → Outcome ki uncertainty price in hoti hai.
Sahi directional bet phir bhi loss kyun kar sakta hai? → Vega loss > delta gain.
Crush exposure kaun sa Greek measure karta hai? → Vega.
ATM price ka formula? → $C \approx 0.4 S σ T$ .

Recall Feynman: 12-saal ke bachhe ko explain karo

Ek mystery box imagine karo jisme candy ho sakti hai ya kuch bhi nahi. Kholne se pehle, bachche guess karne ke liye bahut paisa denge, kyunki yeh exciting aur unknown hai. Jaise hi kholo, sabko pata chal jaata hai andar kya hai — ab koi guess karne ke liye nahi pay karta, toh "guessing tickets" turant almost worthless ho jaate hain. Options stock par guessing tickets hain. Earnings se theek pehle, box band hota hai aur tickets bahut mehengi hoti hain (high IV). Announcement ke baad, box khul jaata hai — ticket prices crash kar jaati hain. Yahi "IV crush" hai, aur yeh tab bhi hota hai jab stock khud barely move kare.

Connections

Vega — woh Greek jo IV crush quantify karta hai.
Theta — time decay bhi event mein accelerate hoti hai.
Black-Scholes Model — jahaan IV price se invert hoti hai.
The Volatility Smile — event days smile/term structure ko steepen karte hain.
Expected Move and Straddles — market aane wale jump ko kaise price karta hai.
Iron Condor / Iron Fly — crush bechne ke defined-risk tarike.
Earnings Season — IV crush ka main habitat.

IV crush kya hai?

Kisi option ki implied volatility (aur isliye price) mein sharp drop, ek scheduled event ke baad jab uncertainty resolve ho jaati hai.

Earnings se pehle IV kyun badhti hai?

Market unknown outcome ko price karta hai; zyada uncertain outcomes fatter premium demand karte hain, yaani higher IV.

IV crush ke exposure ko kaun sa Greek measure karta hai?

Vega — option price ki implied volatility mein changes ke saath sensitivity.

Approximate ATM option price formula?

C \approx 0.4 S σ T

(price IV ke proportional hoti hai).

Kya aap direction mein sahi ho sakte ho aur phir bhi long option par loss kar sakte ho?

Haan — agar IV crush se vega loss, move se delta gain se zyada ho.

Traders IV crush se profit KAISE lete hain?

Event se pehle premium becho (short straddle/strangle, iron condor) aur IV collapse ke baad buyback karo.

Earnings mein IV short karne ka main risk kya hai?

Priced se bada gap move; crush us gap/tail risk lene ka premium hai.

"Implied move" kya hai?

Market ka priced expected move, roughly ATM straddle price; long options se profit ke liye aapka directional edge isse beat karna chahiye.

Earnings ke baad saste options kyun kharidein?

Woh saste hain kyunki uncertainty khatam ho gayi; ab aapko event tailwind ke bina genuine directional move chahiye.