Trading Strategy:

This is the kind of set-up, that most people lose money when they try to play it, even if the stock experiences the anticipated price movement, due to the fact that most people try to take advantage of the situation by using straddles, strangles, or collars, however, none of these strategies deals with ALL three challenges that need to be overcome, in order to make money. These strategies address only one issue, price direction, no matter which way it goes, if you have a straddle, or, a strangle, you're covered, but that is only one third of your problems. There are two other issues that you ALSO need to address, in order to have a profitable trade, by design.
a) The first issue you need to address is the high premiums. It is rather obvious to almost everyone that the potential for a big move is quite high, consequently, the options are grossly overpriced. No matter what strike price you use, you would need at least a $10.00 change in price just to break-even. Between a 10 point move, and a 20 point move, everyone would agree that the odds for the 10 point move, are a lot higher. If you need a move in excess of 10 points to make money, it means that by using any of the above strategies, right from the start you are placing yourself at a dissadvantage because to make money from the trade, the lower probability outcome -a move in excess of 10 points- must occur. Common sense ought to tell you that if you are consistently betting on low probability outcomes, you'll consistently experience negative returns.
b) The second issue you need to address, is the possibility that the price move will be under 10 points, which statistically happens to be the outcome with the highest probability of occurence over time. In that case, you will not experience just poor returns, you will have no returns at all, which happens to be the experience most amateurs have with options.
To address all the above this is how we will structure the trade:
1. We will BUY to open 3 of the May 50 calls
2. We will SELL to open 20 of the May 70 calls
3. We will BUY to open 3 of the May 60 puts
4. We will SELL to open 20 of the May 40 puts.

Now take a look at the P/L graph, the entire trade will ultimately result in a net minimum profit of $560.00 if held until expiration. If the stock stays in a tight range, instead of losing 100% of the money that it costs to buy the straddle, we will get to keep $560.00. If the stock moves 10 points, we stand to make roughly $2,000, and if it moves 20 points, we can make up to $3560! Can we lose money in this trade? YES, absolutely, but it will take a move in excess of 36% in order for that to happen, can it happen? Yes, but how often do stocks move 36%? Not too often, this is the lowest probability outcome of the three.
Consequently, common sense ought to tell you that if you are consistently betting on high probability outcomes, and you keep the amount of capital you put at risk, roughly the same, you'll consistently experience positive returns.
Bottom line: If the chart pattern of a highly volatile stock suggests that a "biggie" is coming, don't try to take advantage of it by buying straddles/strangles, etc. The odds are against you!