The market is pricing a roughly 4% move in Ambarella's (AMBA) shares over the next two days in either direction, even though the company is coming up with earnings tomorrow after market close: (Source: Google Finance) The expected move in the underlying is even smaller once one factors in the moneyness of the call option. Well, of course, if you believe the stock will move by more than 8% in either direction, go ahead and buy a straddle. In my opinion, even though I know the stock is very volatile, especially on earning dates and after, this would be rather reckless. Even if the quarterly results are extraordinary, the stock may not have enough time to move significantly enough to cover the cost of the straddle and make some money for the investors. On the other hand, what you can do is earn money by buying a calendar spread and hoping the stock will not move by more than 10% in either direction: (Source: optionsprofitcalculator.com) Given the risk-return profile of this trade idea, one may ask: "Why not simply sell an iron condor or some variation of a spread? After all, this strategy also relies on the assumption that the stock will not be volatile". Well, there is a big difference here. First, this trade results in a net debit position, which I typically dislike. However and secondly, this idea offers a 4:1 return, as long as the stock stays within the range of $37.70 - $46.00 per share, which approximately a 20% window. You almost never get these figures with iron condors or butterflies, which usually offer a 1:1 risk-return ratio (albeit, with a skewed probability component). This is phenomenal! Remember, although, that the outcome of this trade is greatly affected by implied volatility. If it drops dramatically, the value of the long call will also drop accordingly. Hence, the figures on the chart are only an approximation of the real profits expected to be earned. Other than that, go ahead and buy this calendar spread (you can also do the same with put options)!