Selling the HPQ September 30 Straddle Going Into Earnings Tonight

The trade: I sold the HPQ September 30 Straddle for $4.13.
Profitable – I make money on this trade if HPQ closes on September 16, 2011 between $25.77 and $34.13. I make the most money at $30 (current level).
Breakeven – If HPQ closes at $25.77 or $34.13.
Unprofitable – If HPQ closes under $25.77 I will be long the stock, and I will be short the stock at $34.13. I am capped to the downside of $25.77, but I have unlimited losses to the upside. 
The reason I like this trade: I like to sell volatility when it spikes and buy it when it is cheap. We saw a $5 range in HPQ today after they announced the possible split of their PC sector. September volatility is up 16% and it is very expensive. If the stock has earnings tonight and moves less than $2, or 7%, this straddle price will get crushed tomorrow and I will be looking to cover it then. I think today is as good as a chance in a long time to sell premium, the VIX and volatility.

Andrew R. Keene

See comments below by The Options Institute!!