The Allstate Corporation (ALL) is a holding company for Allstate Insurance Company. The company and its subsidiaries, including Allstate Insurance Company, Allstate Life Insurance Company and other subsidiaries (collectively, Allstate) are engaged in the property-liability insurance and life insurance business. Allstate operates in four business segments: Allstate Protection, Discontinued Lines and Coverages, Allstate Financial, and Corporate and Other. It is reporting earnings on Wednesday, August 3, after market close: (Source: TD Waterhouse)As evident from the above, the company beat earnings estimates in 88% of time in the last eight quarters, underperforming in 12% of time,and has seen modest volatility in the market price of its stock over the last three months: $ALL, Allstate Corporation (The) / 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 expensive: (Source: TD Waterhouse)The three-week straddles (options with a strike price of $67.50) are worth around 4.4% 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 5.2% over the last 52 weeks, while the straddle expiring in a bit less than three weeks has an implied volatility of around 4.1% (calculated based on 13 business days remaining until expiration), also including volatility from the earnings event this week. I therefore see signs of modest overvaluation in these options. Hence, selling the straddle is a good idea from the theoretical standpoint.Investors may also be interested in buying out-of-money options to hedge 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 moves 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?