ACADIA Pharmaceuticals Inc. (ACAD) is a biopharmaceutical company. The Company is focused on the development and commercialization of medicines for central nervous system disorders. The company's lead drug candidate, NUPLAZID (pimavanserin), is under development for the treatment of Parkinson's disease psychosis (PDP). NUPLAZID is a selective serotonin inverse agonist (SSIA), targeting 5-HT2A receptors. It is reporting earnings on Thursday, August 4, after market close: (Source: TD Waterhouse)As evident from the above, the company beat earnings estimates in 13% of time in the last two quarters, underperforming in 87% of time,and has seen substantial volatility in the market price of its stock over the last three months: $ACAD, ACADIA Pharmaceuticals Inc. / 60 The market participants expect the following numbers over the next few quarters, including the upcoming one: (Source: TD Waterhouse)Market data show that the August options are relatively inexpensive: (Source: TD Waterhouse)The three-week straddles (options with a strike price of $37.00) are worth around 11.7% 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 monthly standard deviation of 2067% over the last 52 weeks, while the straddle expiring in a bit less than three weeks has an implied monthly volatility of around 15.6% (calculated based on 12 business days remaining until expiration), also including volatility from the earnings event this week. I therefore see signs of modest undervaluation in these options. Hence, buying the straddles is a good idea from a theoretical standpoint.Investors can also be interested in selling out-of-money options to partially fund the trade: (Source: optionsprofitcalculator.com)On the one hand, this will limit expected returns. On the other hand, this action will minimize losses in the event the stock does not move swiftly over the next three weeks. The risk-return profile of this trade looks like this: (Source: optionsprofitcalculator.com)What do you think of this trade?