Phillips 66 (PSX), an energy manufacturing and logistics company with midstream, chemicals, refining and marketing, and specialties businesses, which operates its business through four segments: Midstream, Chemicals, Refining, and Marketing and Specialties (M&S), is reporting earnings on Friday, July 29, at market open: (Source: TD Waterhouse)As evident from the above, the company beat earnings estimates in 75% of time in the last eight quarters, underperforming or showing in-line results in 25% of time, and has seen substantial volatility in the market price of its stock over the last three months (mostly Brexit-related): $PSX, Phillips 66 / 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 August options are relatively cheap: (Source: TD Waterhouse)The monthly straddles (options with a strike price of $76.00) are worth around 5.3% 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 8.2% over the last 52 weeks, while the straddle expiring in a bit less than a month has an implied monthly volatility of around 6.9% (calculated based on 15 business days remaining until expiration), also including volatility from the earnings event this week. I therefore see signs of clear undervaluation in these options.Investors can also be interested in selling out-of-money options to partially finance the straddles (i.e. "funding"). 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.What do you think of this trade?