Event structure

The earnings volatility cycle

For many stocks, near-term implied volatility can rise into earnings and fall after the report. The exact size and direction depend on demand, surprise risk, liquidity, market regime, and the option expiration selected.

Four-stage map

1. Set-up: traders begin pricing the catalyst.
2. Pre-event: near-term options may carry elevated IV and wider spreads.
3. Release: stock gaps and Greeks can change quickly.
4. Reset: uncertainty falls, IV can contract, and time decay accelerates into expiration.

This cycle is why buying calls before a bullish earnings report can still disappoint if the implied move was already expensive.

Primary reading: OIC implied volatility overview · OIC Vega guide · OIC volatility and Greeks · FINRA options basics and Greeks · SEC Investor Bulletin on options