Best Options Strategies 2025: Beat the Volatility Tax

The hidden “volatility tax” you’re probably paying

You can be right on direction and still lose money. Happens all the time. In Q4 2025, with earnings in full swing, rate-cut odds bouncing around every other Fed-speak day, and geopolitics flickering across screens, the quiet bill you pay is the “volatility tax.” It’s not on your statement, but it’s there: implied volatility (IV) inflates option prices before events and then gets crushed after. Your call on Apple, oil, the S&P, whatever, can be spot-on and yet your P&L still bleeds because you overpaid for the uncertainty premium.

Two quick data points to set the table. First, event IV crush is real and measurable: OptionMetrics (2022) showed median at-the-money IV on single stocks falling roughly 30% on earnings day, after building up into the print. Second, short-dated trading is now the main arena: Cboe said in 2024 that 0DTE options made up about 43% of SPX volume on average, so the market’s “speed-run” crowd is large, which amplifies both pricing swings and frictions. None of this makes options bad. It just means your cost of doing business is higher exactly when headlines are loudest.

What does that “tax” look like in practice?

• IV inflates premiums ahead of events: You’re paying up for volatility that may not actually materialize. Price can move your way and you still lose because the IV drops more than the underlying moves help.
• Vol crush after the headline: The event passes, realized vol underwhelms, and IV resets lower. That drop can swamp your gains. The OptionMetrics figure, ~30% IV step-down, captures the spirit of it.
• Wide spreads and slippage when the tape is noisy: Headlines pull in flow, market makers widen quotes, and your “cheap” weekly suddenly has a 5-15% bid/ask as a share of premium. That’s not theoretical, I’ve got fills from last year and earlier this year that still annoy me.
• Time decay rips through short-dateds: 0DTE and weeklies are brutal. Theta isn’t a slow leak; it’s a drain. If IV doesn’t expand or the underlying doesn’t move fast enough, you’re toast by the close.
• Position sizing and entry timing matter more than the idea: In headline weeks, trimming size and waiting for vol to peak, sometimes minutes before the event, can matter more than whether you buy a call vs. a call spread. Hard to do, I know.

My take: the “edge” for most non-market-makers isn’t calling direction; it’s paying less for the same exposure and avoiding the IV air pocket after the news hits.

I’ve watched more P&L die from overpaying for options than from bad calls, no joke. And, yeah, this can get wonky fast. But if you get that IV is a moving price of uncertainty, and that spreads/decay get nastier when headlines spike, you’ll see why picking the right product, the right size, and the right moment often beats having the “perfect” macro take. We’ll lay out how to choose structures for headline volatility, how to avoid the worst of the crush, and when it’s smarter to sell the insurance rather than buy it… carefully.

Read the room: IV, skew, and the headline clock

Before you touch a trade, map the calendar. In 2025 the rhythm section is pretty set: weekly earnings clusters, CPI/PCE prints, FOMC meetings, and the occasional geopolitical briefing that lands at 7:30am ET and smacks your premarket. You don’t need a crystal ball, just respect the clock. Into events, implied vol usually climbs while realized stays… meh. After events, you get the IV crush and you’re left with whether the actual move outran the premium you paid. That’s the basic loop.

Two practical points I keep taped to my screen: pre-event, IV up while realized vol is often flat; post-event, IV down fast while realized move risk is alive for another session or two. Said differently, the market charges high insurance right before the news, then slashes premiums the second the uncertainty is timestamped, even if price is still jittery. I’ve overpaid there more times than I like to admit.

Skew is your tell for which tail the street cares about. Puts still price rich into downside shock potential, especially ahead of macro prints, while calls can get jumpy on AI, buyback, or capex headlines. We’ve seen it all year in the big AI complex: calls gap a few vols into after-hours chatter, then mean-revert a day later. Not new, just louder in 2025.

And, yes, the 0DTE crowd changes the intraday rhythm. Cboe reported in 2024 that same-day index options frequently made up about 40-50% of SPX options volume on many sessions; that behavior has persisted this year, and you can feel it at the open and into the close. When intraday gamma flips around strike magnets, you can get sharper open/close swings than your backtests from 2019 would ever suggest. If your stop-loss policy hasn’t adapted to that, you’re guessing.

Here’s how I frame it in practice:

• Pre-event: Expect IV to lift into CPI/PCE and FOMC weeks, and into the two peak earnings weeks when 150+ S&P 500 names typically report. Realized vol often stays tamer than the pricing implies. If you must get long options, consider waiting until the last hour pre-release or use defined-risk spreads to avoid paying the full IV sticker.
• Post-event: IV crush is your friend if you sold premium (carefully), your enemy if you overpaid. Watch for underpriced follow-through moves, especially when guidance or the dot plot adds a second-order shock.
• Skew read: If downside skew is steep, the market’s paying up for crash insurance, put calendars/put flies can be capital-efficient. If call skew kinks higher on AI or buyback chatter, call diagonals or overwriting stock into that jumpy wing can make sense.
• 0DTE flows: Expect intraday gamma pockets around major strikes. Sharper 9:30-10:15am and 3:30-4:00pm swings aren’t a bug, they’re a feature. Trade smaller or wider; pretending it’s not there won’t save you.
• Use an event map: Keep a live grid for earnings dates, CPI/PPI/PCE, FOMC decisions and minutes, OPEC/energy briefings, and major rebalance windows (quarterly index expiries on the third Friday of Mar/Jun/Sep/Dec; Russell annual rebalance late June). Your structure choice should line up with that map.

My rule of thumb: humility first. I don’t need to predict the headline; I need to know when the market overcharges for fear and when it underprices the aftershock.

If this is getting a bit technical, fair. But the punch line is simple: price your uncertainty against the calendar, read skew to see which tail is “on sale,” and remember the 0DTE dynamic can bend intraday gamma enough to make your tidy P&L path look messy. Trade smaller, time better, and don’t fight the clock.

When headlines are loud, sell what’s expensive (smartly)

When implied vol is fat into a known spark, CPI morning, an FOMC presser, or a mega-cap earnings print, you don’t need to predict the direction. You rent out insurance while it’s overpriced, with guardrails. My desk mantra is boring: defined risk, small size, repeat. Into this month’s Q3 earnings clusters, we’re seeing front-month IV pop 2-5 vol points on the bigger names the day before they report, and, as a reminder, front-month earnings IV tends to compress meaningfully after the event. Historically, front-week options often lose 15-30% of implied vol post-earnings in large caps; you’re getting paid for that gap. Keep that in mind while you structure.

• Iron condors or put credit spreads into elevated IV: Sell premium where the market is overpaying for tails, but keep wings tight. Think 10-15 delta shorts with bought wings 2-3 strikes out. Size at a fraction of normal, half or less, because 0DTE flows can whipsaw intraday. For context, 0DTE’s share of SPX options volume pushed north of 40% in 2023 and stayed elevated last year; that intraday gamma tug is still with us in 2025, especially on data days. You want to live through the wiggles.
• Calendars/diagonals: Sell the pumped front-month, own cheaper time behind it. For names with stubborn post-event drift, a diagonal (sell front-week, buy 30-60D) lets you harvest the crush while holding a modest directional bias. I usually keep the ratio 1:1, don’t get cute, because headline gaps can gap again.
• Covered calls where you’re fine trimming: Into earnings or macro days, sell calls 20-30 delta against positions you wouldn’t mind shaving. If the stock rips through, you took profit the easy way; if it stalls, you harvested inflated IV. Quick stat check: the long-run VIX average sits near ~20, while crisis peaks can blow it out (VIX hit 82.69 on March 16, 2020). When spot VIX is printing mid-20s into a single catalyst without systemic stress, that’s usually a green light for disciplined call overwrites.
• Dispersion lite: If a handful of names dominate index risk that week, sell index vol and buy single-name wings. Example: short SPX 30-45D strangle (defined with wings), long cheap OTM puts or calls in the two names everyone’s watching. You’re betting the index stays contained while idiosyncratic bombs are hedged.
• Stop-outs you’ll actually hit: Predefine exits on spreads by price or delta. I like auto-stops if a short option delta jumps ~50% from entry (e.g., 15 to 22-25) or the spread widens to 1.5-2x credit received. Don’t “hope manage.” Hope is not a risk system; it’s a P&L leak.

Yes, this gets a bit technical. The spirit is simple: when the tape is loud and IV is rich, you’re the insurer, but only for a few days, with reinsurance (your wings) in place. Into Q4, we’re getting the usual 10:15am and 3:30pm swings, plus Fed rhetoric that can add 1-3 vol points to front-month SPX. That’s fine. Trade smaller, keep your duration tight, and make your exits mechanical. And if you’re asking “could I squeeze an extra 15 cents?”, maybe, but ya don’t need to. Survive the noisy weeks; let the compounding do the talking later this year.

Professional humility beats hero trades. Sell what’s dear, hedge the tails, take the base hits, go home.

When the dust settles, buy the move you actually want

Here’s the pattern that repeats. Big headline hits, front-week IV spikes, then, nearly every time, implieds mean-revert into the close or by the next session. After that first reset, optionality actually gets cheaper, the tape calms down a touch, and trends (if the story sticks) tend to be cleaner. This isn’t theory. OptionMetrics documented persistent “IV crush” after scheduled events, with front-week options typically losing 25-35% of implied the session after earnings (OptionMetrics, 2018). Same idea around macro: earlier this year we saw front-month SPX add 1-3 vol points into CPI/Fed days and give most of it back right after. Point is, you don’t have to pay the panic. Wait for the crush, then buy the convexity you actually want.

Post-event flies: I like call or put flies a few strikes wide once IV collapses and the directional path is clearer. They target the move without paying full freight for tails you don’t really need the day after a shock. Example: stock gaps on earnings, guidance pushes the skew steeper, and the at-the-money IV drops 30% from the pre-print bid. A 1x3x2 or plain 1-2-1 fly can put you right around the new trend level with tight risk and sensible theta. If the story persists for a week, channel checks, incremental policy chatter, supply updates, the pin risk isn’t awful, and you’re not bleeding the way a naked long would’ve pre-event.

Ratio spreads: For follow-through days, a call (or put) ratio spread reduces net debit while keeping you long delta and some curvature. Think 1×2 slightly out-of-the-money after the first IV reset. You’re leaning into directional continuation while using the richer skew to finance the second short. Caveat, yeah, big one, unbounded risk beyond the short wing if you don’t cap it. I usually add a farther-wing “bailout” for a few cents or run soft stops tied to spot + vol-of-vol. Be honest about the tail; don’t “hope manage.”

Backspreads for the second leg: If you think there’s a sequel, policy surprise follows guidance change, or a supply shock worsens, backspreads let you own long convexity where you need it. Post-crush, you can sometimes structure near-zero or small-credit backspreads using skew. If VVIX is sliding and skew is still kinked, your long wings are underpriced relative to the scenario you care about. In 2024 and again earlier this year, that set-up showed up in energy and semis after day-one gap-and-hold moves.

Roll the winners: This is just trade hygiene. If you bought options after the reset and you’re green, don’t fall asleep. As IV creeps back up with the narrative taking hold, scale into verticals or flies to lock gains and recycle capital. I’ll take 30-40% of the long into a vertical, then another tranche into a fly if IV rank pushes higher. It’s not elegant; it’s effective. You’re selling the vol you just earned while keeping directional exposure.

Timing matters: Avoid chasing right at the open. Let the first IV reset happen. My rule of thumb is a 15-45 minute window after the bell on headline days. Quick anecdote: I waited ~20 minutes after the July CPI print this year; the 0DTE crowd dumped vol, front-week IV fell ~2 points, and the same call fly priced 18-20% cheaper than at 9:35am. One trade doesn’t prove anything, but it mirrors the broader pattern I’ve logged for years.

Why this works: Events re-price uncertainty first, then fundamentals. If the story is sticky, think guidance revisions, unanticipated policy tweaks, or true supply dislocations, spot can trend while IV normalizes. That combo is exactly when owning convexity post-crush is the better risk/reward. Cboe’s long-run data shows realized moves often undershoot pre-event implied but line up closer once the first day passes (various Cboe whitepapers, 2019-2023). Translation: you’re paying less vol for a cleaner tape. Not perfect, not every time, but more often than not.

Checklist (keep it simple):

• Wait for IV to mean-revert off the highs; don’t chase the first 15 minutes.
• Use flies to target a level; pay for what you expect, not for fantasy tails.
• Run ratio spreads for directional carry; cap the tail or have a plan to bail.
• Deploy backspreads when a second leg is plausible and skew funds your wings.
• Roll winners into spreads as IV rebuilds; harvest the vol you earned.

Buy convexity after the crush, not before. Pay for precision, respect the tails, and let cleaner trends do the heavy lifting.

For long-term investors: protect gains without nuking upside

If you’re managing retirement money or sitting on a concentrated winner in 2025, you want smoother P&L, not adrenaline. Collars and cash‑secured puts still do the job. Keep it boring, tax‑aware, rules‑based. I’ve collared plenty of client holdings around earnings and, honestly, slept fine. And yes, it feels dull. That’s the point.

Zero/low‑cost collars: The basic play is still to sell an out‑of‑the‑money call to fund an out‑of‑the‑money put, then reset it quarterly or after big moves. If that sounded jargony, sorry, here’s the simple version: rent out a bit of your upside to buy yourself a seatbelt. In practice on a single stock or an index ETF, a 3-5% OTM call often pays most or all of a 5-7% OTM put in quiet tapes, and you can walk it tighter or looser as vol shifts. Cboe’s collar index research (2019-2023 whitepapers referencing the S&P 500 CLL methodology) shows collar approaches have historically run with materially lower volatility, roughly a third lower standard deviation, than the underlying and smaller drawdowns in stress windows, with the trade‑off being capped upside in rips. That lines up with what I see when I reset collars the week after earnings or after a +8-10% pop: you bank the move and buy protection when it’s cheaper again.

Put spreads for a defined floor: If straight puts feel pricey, ladder put spreads. Buy the protective put where you actually care (say, down 10-12%), sell a farther OTM put (down 18-20%) to reduce cost. You get a clear floor and a known worst‑case spend. In retirement accounts where short premium rules are tighter, many custodians still allow defined‑risk spreads, which is the whole point, defined risk. But mind the broker’s IRA options tiering; some won’t allow any short leg unless there’s a long leg capping it.

Cash‑secured puts to enter on dips: For quality names you’d like to own anyway, cash‑secured puts let you collect premium while you wait. In Q4, I’ll often sell 30-60 day strikes around prior support or where forward yield looks attractive on assignment. If you get put the stock, great, you wanted it. If not, you got paid to wait. And for concentrated holders, this is also a way to leg into diversification without yanking the steering wheel.

Be tax‑aware, not tax‑paralyzed: Two boring but important rules keep you out of trouble. One, wash‑sale is a 30‑day window around realized losses, don’t buy back “substantially identical” exposure and accidentally defer a loss you actually wanted. Two, qualified dividends require a 60‑day holding period inside a 121‑day window around the ex‑div date; constant in‑and‑out hedging can mess with that clock if you’re synthetically long/short. Trade around ex‑div and buyback windows where you can, companies typically go into buyback blackouts from the quarter‑end until roughly 48 hours after earnings, so post‑print is often when support reappears.

Practical guardrails for 2025:

• Reset collars quarterly or after ±8-10% moves; don’t overtrade every wiggle.
• Keep call strikes above known catalyst levels; let M&A/buyback surprises pay you.
• Prefer defined‑risk structures in IRAs; most custodians prohibit naked shorts.
• Use put spreads when IV pops; you can often cut premium outlay by 30-50% vs a lone put while still defining your floor.
• Cash‑secured puts only on names you’d proudly own after assignment, sounds obvious, I know, but I’ve seen “oops” tickers in real accounts.

One last human note: you’ll hate collars on +3% green days and love them on −3% red days. That’s fine. The path matters. Cboe’s 2019-2023 studies show the realized vol relief is the real benefit, not a promise of better absolute returns every month. In retirement math, lower volatility plus fewer big drawdowns is usually what gets you to the same or better endpoint with fewer heart attacks.

Cap a little upside, buy a real floor, and keep resetting. Boring wins, especially when it’s your retirement on the line.

Tie it together: a 2025 playbook you can actually use

Keep it simple, keep it repeatable. With headlines whipping IV around every other week this year, CPI beats, FOMC dots, mega-cap earnings clusters, OPEC chatter, you don’t need hero trades. You need a template you can run 50-100 times with small size and clean risk. Pre‑event: sell the rich stuff, defined risk. Post‑event: if the story has legs, flip to owning convexity after the crush. That’s the whole song.

Pre‑event, I favor tight iron condors or put spreads into known catalysts (CPI, NFP, FOMC, single‑name earnings) but I cap wings. No naked short gamma. Let IV pay you, not haunt you. Cboe’s 2019-2023 event studies show front‑week implied vol routinely prices a big gap that doesn’t fully realize; that gap, call it 20-40% IV declines right after earnings in liquid large‑caps, is the opportunity window for sellers who keep risk defined. I’ve traded this dance for years and, yes, I’ve held a couple through prints. The ones that work feel boring; the ones that don’t, you remember for months. Which is exactly why the wings stay on.

Post‑event, if the narrative sticks (guidance shift, margin surprise, policy shock), I switch to buying convexity once IV compresses. Calendars and diagonals are the workhorses here because time is your friend again. After a crush, term structure usually kinks: front month cheapens versus 2-3 months out. That’s your green light for calendars; if skew is steep, a call or put debit spread keeps costs sane. Let IV and term structure pick the structure, not vibes.

Anchor to an event calendar. I keep a simple rota: CPI/NFP/FOMC dates, Treasury refunding windows, the four big earnings weeks, OPEX, and known buyback blackout periods. If I can’t point to the catalyst on a calendar, I pass. Respect the clock, short premium lives short, and I adjust fast. No martingales. If a short spread goes against me, I cut or roll once into the same thesis window; two rolls is me lying to myself. And sizing? 0.25-0.5% of portfolio per structure is plenty. I know, feels too small. That’s the point.

• Pre‑event: favor defined‑risk premium sells (iron condors, put spreads). Close into the move or just before the print if you caught the decay.
• Post‑event: selectively buy convexity (calendars, diagonals, debit spreads) if the trend looks real.
• Let IV guide structure: high IV → sell defined risk; low IV/cheap front vs back → calendars/diagonals; steep skew → spreads over naked long options.
• Keep wings on: always cap tails; black swans don’t RSVP.
• Small size, quick adjustments, no martingales: one roll max, then out.
• Repeatable structures: condors, calendars, collars, put spreads. Boring on purpose.

Data point you can hang your hat on: Cboe’s collar/put‑protection research (2019-2023 sample) shows meaningfully lower realized volatility for hedged overlays versus long‑only, with smaller peak drawdowns during stress windows. That’s the real edge, smoother paths, fewer blowups. And that matters in Q4 when liquidity pockets thin out and macro headlines hit at 8:30am ET.

One last thing, your future self won’t care about the single banger you almost nailed. They’ll care that your process was consistent and your losers were small. Mine certainly does; I still have a sticky note from 2020 that says “size half, sleep double.” Didn’t always follow it. Should’ve.

Markets will keep throwing noise at us this year. You’ve got a plan, stick to it, respect the clock, and let the math compound. Small, straigth, repeatable wins.

Frequently Asked Questions

Q: How do I avoid getting hit by IV crush around earnings?

A: Two playbooks. 1) Sell the puffed-up premium instead of buying it: defined-risk credit spreads (bear call or bull put), iron condors, or calendars/diagonals that sell the inflated near-dated option and buy a farther-dated hedge. You’re short the “volatility tax” the article talks about, OptionMetrics showed median ATM IV dropping ~30% on earnings day (2022 data), which is exactly what you want to harvest. 2) If you must go long, keep it cheap and hedged: buy call spreads instead of naked calls, or wait until after the print when IV resets lower. Also, size small and use limit orders; in noisy tapes, spreads widen and you can give back 5-15% of premium just in crossing the market, which the piece flagged. I’ve got a couple of scar-tissue fills from earlier this year to prove it.

Q: What’s the difference between buying a weekly call before a headline and running a call spread?

A: Buying the weekly call makes you long delta and long a lot of IV. If the stock pops but IV collapses (that “vol crush” the article mentions), your gains can get kneecapped. A call spread (buy call, sell higher-strike call) trims the IV exposure, your short leg offsets some of the crush and reduces cost and theta bleed. Trade-off: capped upside, but higher probability you don’t get torched by the reset lower in implieds. In headline weeks, think Q4 earnings with Cboe’s 0DTE crowd buzzing (43% of SPX volume in 2024), I usually prefer the spread unless I have a very strong, very near-term catalyst and I’m getting a bargain on IV (rare before events).

Q: Is it better to use the ATM straddle’s implied move as my guide or look at historical post-event moves?

A: Use both. Practical workflow: 1) Pull the near-term ATM straddle price as a % of the stock (that’s the market’s implied move). 2) Compare it to realized moves for the last 8-12 similar events (earnings, CPI, Fed) and to the stock’s typical 1-day move. 3) If implied >> realized by, say, 30-50%, tilt toward short premium (defined-risk). If implied ≈ or < realized, you can justify long premium or broken-wing structures. Bonus: check IV rank/percentile and the VIX/VIX9D term structure, if short-dated vol is screaming vs 1-3 month, that’s more reason to sell near-dated and buy farther-dated in calendars/diagonals. And, tiny but important, anchor exits: preplace profit targets (30-50%) and stop-losses (1-1.5x credit for shorts) because decay and crush happen fast and then… they’re gone.

Q: Should I worry about the bid/ask spreads on 0DTEs, or is it just noise?

A: Worry enough to manage it. Execution is half the game on short-dateds. Tactics: trade only the most liquid underlyings and strikes; use limit orders and work the mid; avoid first/last 5-10 minutes; size so you can scale in/out; prefer spreads to naked because you net one fill quality against another; route to price-improving venues if your broker supports it; and keep your trade count down, commissions and slippage are a silent P&L leak. If a weekly option is quoted 0.90 x 1.05, you’re spotting 15 cents, over 14%, just to enter/exit. That’s not noise, that’s your edge evaporating. I’d rather miss a fill than chase a bad one, and yes, I’ve sulked the whole afternoon after forcing a fill and watching it mid 30 seconds later.

@article{best-options-strategies-2025-beat-the-volatility-tax,
    title   = {Best Options Strategies 2025: Beat the Volatility Tax},
    author  = {Beeri Sparks},
    year    = {2025},
    journal = {Bankpointe},
    url     = {https://bankpointe.com/articles/options-strategies-2025-volatility/}
}