Basic Points

• Implied volatility crush means a decrease in implied volatility (the expected percentage move over the next year based on option prices with 68.3% confidence) that forces the price of an option to drop. 
• The decline in price from IV crush hits hard on OTM (out of the money) options since their price is entirely comprised of extrinsic [time premium] value. 
• IV crush is tougher pointwise on ATM (at the money) options since they have the most amount of extrinsic value (vega and theta), which are major option price drivers based on implied volatility and time decay respectively. 
• However, IV crush is the toughest on OTM options point-wise. Over the term structure (IV compared graphically to time), longer-dated options are also extra-sensitive to drops in IV since they have more vega (the sensitivity of an option’s price to implied volatility. 
• As implied volatility decreases, the price of OTM options will decline especially rapidly. The idea is that the price is being crushed because of IV.

Advanced: Strategy

Even though a deep OTM long call is entirely made of extrinsic value, it still has less total extrinsic value in it than an ATM option, and so buying deep OTM calls during the heat of a major sell-off can help because if IV crushes while spot (the actual underlying price) recovers then it will have less IV to crush.

In general, much of volatility trading is anticipating IV crush, such as what typically happens when event vol (excess IV due to a high-risk situation) gets rushed out of a contract after a major event like earnings. Using proper hedging techniques, good premium sellers (collecting time premium from short options or credit spreads) have an instinct for writing options during IV spikes so there is more room to crush. However, take care to be extra on guard when under the Volatility Trigger™, since heightened realized volatility (the expected movement over a period of time based on historical data with 68.3% confidence) is expected then, which makes premium selling more dangerous.