How IV Crush can lead to a loss even if you were directionally correct - Vega ate Delta's Lunch

I worked through a recent earnings scenario that I think illustrates why long call into earnings is risky even when you're directionally right.

Setup: 5% OTM call

stock $100

strike $105

5 DTE, premium $2.20 at 75% IV

Result:

Earnings releases.

Stock rallies 4% to $104.

Call drops to $0.70.

**A 68% loss on a winning directional thesis.**

Why?

Delta gain: $4 move × 0.30 delta = $1.20 per share

Vega loss: 45 IV points × $0.06 vega = $2.70 per share

Net: −$1.50 per share, −$150 per contract

The market priced 75% IV. The 4% move was less than priced in.

Vega ate Delta's lunch.

Long premium into earnings only pays when the realized move > implied move.