This filing explains the often-overlooked 'IV rush' phenomenon, where implied volatility in options contracts significantly increases in the days leading up to an earnings report. This pre-earnings ramp, which can be substantial and back-loaded, is a crucial counterpart to the well-known 'IV crush' that occurs post-earnings, impacting options pricing and trading strategies.
The filing highlights that options traders often focus solely on the 'IV crush' after earnings, but the 'IV rush' – the significant increase in implied volatility before earnings – is equally important. This pre-earnings ramp, driven by event risk compression and demand, can be substantial and heavily back-loaded, as demonstrated by Salesforce (CRM) data showing a 90% climb in the final 5 trading days. The pattern is not universal, with stocks like Intel (INTC) showing a 150% climb versus NVIDIA (NVDA) at 70%, indicating a 'per-stock fingerprint.' This insight is crucial for options traders to understand the full volatility cycle, allowing for more informed pricing and strategy adjustments, particularly for those looking to buy or sell options in the days leading up to an earnings announcement.