Stock is at 550, both calls and puts are $35. Selling a straddle and closing it before the earnings seems to be a winner. I don't think the stock would move 70 bucks in either way.
I see options (and shares) trading lower, but even at your prices, the total premium received is ~12.5% of the quoted share price. The share price reaction (1 day before to 1 day after) to the last 2 earnings releases (October July) was +17.7% and -13.6% respectively. With the share price (and volatility) now significantly above where it was around previous releases I don't think this is a low-risk bet...
As H20 stated. Vol is likely to stay bid going into the event. The stock only needs to move a few dollars to start making this position a loser
The stock is 5 bucks higher right now. The puts dropped to 30ish while the calls didn't really increase much. So this position could be bought back for a 6% gain right now. (sold for 70+, currently at 65.5) My point was to buy it back before the earnings. So Wednesday afternoon. Your point is good, but we shall see if IV increases between now and then.
Sold to you. The market is fully aware of past history, and it’s baked into option prices. Vol may be a massive sale (or buy), but betting on either case is essentially a coin flip (unless you know something the market doesn’t, and if you did, I doubt you would post it in a public Internet forum).
Given the latest long only bias since March 2009, I would simply buy calls and not engage in anything more "sophisticated" .