Dollar Tree, Inc. (DLTR) is an operator of discount variety stores. The company operates approximately 13,851 discount variety retail stores. The company's segments include Dollar Tree and Family Dollar. The Dollar Tree segment operates discount variety stores offering merchandise at a fixed price. The Family Dollar segment operates a chain of general merchandise retail discount stores providing consumers with a selection of merchandise in neighborhood stores. It is reporting earnings on Thursday, August 25, after market open:(Source: TD Waterhouse)As evident from the above, the company beat earnings estimates in 37% of time in the last eight quarters, underperforming in the rest of time, and has seen modest volatility and a strong positive trend in the market price of its stock over the last three months:\n \n The market participants expect the following numbers over the next few quarters, including the upcoming one:(Source: TD Waterhouse)Market data show that the September options are undervalued:(Source: TD Waterhouse)The four-week straddles (options with a strike price of $95.00 and expiring on September 16, 2016) are worth around 6.8% 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 8.8% over the last 52 weeks, while the straddle expiring in a less than four weeks has an implied monthly volatility of around 8.1% (calculated based on 18 business days remaining until expiration), also including volatility from the earnings event next week. I therefore see signs of undervaluation in these options. Hence, buying the straddles is a good idea from a theoretical standpoint.