Earnings season is the Super Bowl for options traders. Every quarter, companies report earnings and stocks make massive moves in a single after-hours session. Options prices inflate dramatically before earnings because everyone knows a big move is coming — this is elevated implied volatility (IV). The catch: IV collapses immediately after earnings are announced, regardless of direction. This is 'IV crush,' the single most important concept for options around earnings. Ignore it and you'll buy options that lose money even when you're right about direction.

Here's IV crush in practice. A stock is at $100, earnings are tomorrow, and a call costs $5 because IV is pumped up. After earnings, even if the stock goes to $103, IV collapses and that call might only be worth $3.50. You were RIGHT about direction and still lost $1.50 per contract. The options were priced for a $7 move, the stock only moved $3, and IV crush ate the rest. The market makers who sold you those overpriced options are the ones collecting.

How to play earnings profitably: One approach is straddles or strangles — buying both a call and put, betting the stock moves MORE than what's already priced in. Calculate the 'expected move' by adding the at-the-money call and put prices. Another approach is selling options before earnings to collect inflated premium — but this carries huge risk on unexpected moves. A third strategy is trading the post-earnings drift: stocks that beat tend to keep drifting up for days or weeks after.

Post-earnings drift is the safest earnings strategy. Studies show stocks beating estimates tend to outperform for 60-90 days after the report. Instead of gambling on the binary event, wait for the reaction, assess the move, then enter in the drift direction using stock or lower-IV options. This eliminates IV crush entirely. You sacrifice the explosive overnight move but gain much higher probability. The smartest money doesn't gamble on the announcement — it trades the aftermath.