Ocean RIG UDW Inc (ORIG) is a Cayman Islands-based offshore drilling contractor. It provides oilfield services for offshore oil and gas exploration, development and production drilling, and specializing in the ultra-deepwater and harsh-environment segment of the offshore drilling industry. The company owns and operates offshore ultra deepwater drilling units, comprising of ultra deepwater semisubmersible drilling rigs and ultra deepwater drillships (Source: TD Waterhouse). It is reporting earnings on Friday, August 12, before market open: As evident from the above, the company beat earnings estimates in 75% of time in the last eight quarters, underperforming in the rest of time, and has seen substantial volatility in the market price of its stock over the last three months: $ORIG, Ocean Rig UDW Inc. - Class A / 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 a undervalued: (Source: TD Waterhouse)The two-week straddles (options with a strike price of $2.00 and expiring on August 19, 2016) are worth around 18.7% 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 32.0% over the last 52 weeks, while the straddle expiring in a less than two weeks has an implied monthly volatility of around 17.2% (calculated based on 7 business days remaining until expiration), also including volatility from the earnings event this week. I therefore see signs of undervaluation in these options. Hence, buying the straddles is a good idea from a theoretical standpoint.Investors may also be interested in buying call spreads to lower the cost basis of 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 week. The risk-return profile of this trade looks like this: (Source: optionsprofitcalculator.com)As you can see from the above illustration, the break-even price is around $2.12. This means that the stock has to move roughly 2% upwards n from the current price by expiration in order for investors to break-even. The risk-reward ratio of around 1:3.16 is above-average for this type of option strategies.