1. Earnings Season & the IV Crush
Earnings season is a storm. Companies release their quarterly numbers. Traders rush in, chasing big moves. Yet, after the news breaks, implied volatility (IV) often collapses. That’s the “IV crush.”
What It Is: Before earnings, option prices inflate. Why? Because the market fears sudden gaps or surprises. Once the report is out, uncertainty fades fast. Option premiums shrink.
Why It Matters: Even if you predict the right direction, a drop in IV can harm your profit. A call might lose value despite the stock moving up.
Managing It: Some traders sell options ahead of earnings to capture the inflated premium. Others buy spreads instead of single options to reduce IV risk.
UnusualFlow Angle: In the days before earnings, watch for large sweeps or blocks. If institutions are piling into calls or puts, that can hint at a strong directional play. But remember: they may close or adjust these positions right after the announcement to dodge the IV crash.
2. Event-Driven Volatility
News can send markets into a frenzy. A trade war, a central bank statement, or a CEO scandal—any such spark can ignite large, fast moves.
Geopolitical Shocks: A surprising piece of macro news—like sudden tariffs—can lift implied volatility across the market. You’ll see calls and puts both jump in price as traders scramble.
Company-Specific Events: Product launches, lawsuits, or mergers can generate sharp swings in a single ticker. Options activity surges when headlines break.
How It Shows in UnusualFlow: Big players often appear first. They buy large blocks of options in minutes, hoping to front-run or profit from the story. This shows up as sweeps or high premium trades.
Strategy Tip: If you catch wind of a major event and see suspiciously big orders, consider the reason. Are institutions hedging bad news, or is it a bullish bet on pending good news?
3. Pre-Earnings Sweeps
Institutions prefer a head start. Sometimes they know what’s coming—or they think they do. They can’t wait until the official call.
Spotting Sweeps: On UnusualFlow, watch for repeated call or put buys in the days (or hours) before an earnings report. Large sweeps signal urgency. They also hint at big conviction.
Assessing the Risk: Sweeps near the ask mean buyers are rushing to pay top dollar. If the stock moves as they expect, the payoff can be huge. But if it doesn’t, the IV drop hits them hard.
Timing: Often, these sweeps happen one or two days before the announcement. Or even on the same day, just before the close. Institutions might expect a post-market announcement to shake the stock.
Next Steps: Check if open interest rises the next day. If OI jumps, the position likely remains open. This can confirm a serious bet—not just a quick scalp.
Final Thoughts
Earnings and news events shape the market’s heartbeats. They raise volatility, test nerves, and create big winners—or losers. On UnusualFlow, keep an eye on large sweeps, blocks, and high premium trades near these events. Pay attention to IV crush risk. Watch for pre-earnings plays and big bets on macro headlines. By doing so, you’ll catch glimpses of how “smart money” positions itself in the storm.