Implied volatility overstatement and implied volatility drop can be esoteric concepts to understand, so today we are going to compare the two to concepts that we can understand: risk and return.
IV overstatement is best used as a measure of risk for your position. The higher the IV, the lower the overstatement, the higher the risk, and vice versa.
IV drop is best used as a measure of reward. The higher the IV, the larger the drop in IV, the higher the P/L historically, and vice versa.