What is IV crush?
Implied volatility (IV) is the size of swing an option's price assumes. Before news such as a company's report, prices assume a big swing; once the news is out, that swing is behind them and IV usually falls. That fall, the crush, lowers option prices, and a bought option can lose value even if the stock moves the way you hoped.
Try it: a call on a $50 stock, strike $50, 30 days left, priced at 60% implied volatility the night before a report and 30% the morning after (made-up levels). Move the stock overnight.
Simulated example, priced by the StrikePath engine (Black–Scholes, interest 4.3% a year). For learning; not advice.
Why it happens
Before a report, nobody knows whether the stock will jump or drop, so options are priced for a large move either way. After it, that one source of uncertainty is gone, so prices for the remaining days usually go back to assuming an ordinary swing. The size of the crush differs by company and by report.
Who it hurts, and who it helps
Someone who bought an option before the report pays for the expected swing; unless the stock moves far enough their way, the crush takes more than the move gives; the example above shows how far. Someone who sold one gains from the crush, and carries the risk of a move bigger than expected.
What this shows, and what it doesn't
Made-up levels of implied volatility. Real levels before and after a report vary widely; compare the implied volatility your broker shows for the same contract before and after; the price change alone mixes the stock's move with the crush.