Chipotle Mexican Grill (CMG), whose restaurants serve a menu of burritos, tacos, burrito bowls and salads in a few countries in North America and Europe in over 1970 restaurants, is reporting earnings tomorrow after the market closing:(Source: TD Waterhouse)The company beat earnings estimates in 87.5% of time on the last eight quarters (underperformed in 12.5% of time) and has shown swift movements in the market price of the stock: $CMG, Chipotle Mexican Grill, Inc. / 60 The market participants expect the following numbers over the next few quarters, including the upcoming one:(Source: TD Waterhouse)On the other hand, market data show that the short-term options are relatively cheap:(Source: TD Waterhouse)The straddles (options with a strike price of $420) are worth around 8.2% of the current market price of the stock. Historically, the stock has been more volatile than that on a monthly basis over the last year:(Source: Google Finance. Calculations by author)As you can see, the stock has had a weekly standard deviation of 4.7% over the last 52 weeks, while the straddle expiring in a bit more than a week has an implied weekly volatility of around 5.7%, while it also includes volatility from the earnings event tomorrow. I therefore see signs of clear undervaluation in these options.What do you think of this trade?