Scenario lab
IV crush examples and scenario table
These hypothetical examples show why the same stock move can produce different option outcomes depending on vega exposure and IV change.
ScenarioStock moveIV changeWhat to notice
Right direction, bad volatility+ $375% → 48%Delta helps, vega can offset part of the gain.
Wrong direction, volatility crush- $275% → 45%Both price and volatility work against long premium.
Huge move beats crush+ $1290% → 55%Large intrinsic move may overwhelm volatility loss.
Short premium gap risk- $1880% → 50%IV collapse does not protect against a gap beyond risk limits.
Reading the table
The key is not whether the stock moved. The key is whether the stock move created enough intrinsic and theoretical value to overcome the volatility reset and remaining time decay.
Primary reading: OIC implied volatility overview · OIC Vega guide · OIC volatility and Greeks · FINRA options basics and Greeks · SEC Investor Bulletin on options