After shorting Pandora (P) and covering before it hit bottom, I've kept an eye on them from time to time.
Looking at Pandora and the volatility of today 8.81% (5-8-2012) over good news, but not really telling of positive monetary growth of the company, lead me to looking at the options trades. Based on 5-8-2012 close, the strangle appears to be the best bet for those thinking the stock will move radically when earnings come out. Since earning come out on May 16th and the May options close is the 19th, it is a good time to take advantage of that close relationship.
A strangle is the simultaneous purchase of both a call and put of different strikes with the same expiration date. This strategy is often used when a large move of a stock is expected but the movement is unknown. Which is what we have in P at this time.
The best option I see is the 10c/8p choice. That is, buying both the $10.00 call and the $8.00 put. The cost is between $0.15 and $0.30 per share, making it $15.00 to $30.00 per contract (includes the cost of both the call and put). Splitting down the middle would have you at $22.50.
By the CBOE calculations, the current raw value of the $10.00 call is $10.20 per contract and for the $8.00 Put $22.09. Assuming both ways, if the stock jumps to $10.00 the call will be worth $56.60 at $11.00 it will be $122.33, and at $12.00 it will be $207.36. Conversely, if the stock drops to $8.00 the put will be worth $39.71, at $7.00 it will be worth $106.00, and at $6.00 worth $200.27.
Keep in mind these are the raw values with the IV at 71%, which is current, and contains no time value. Typically all the time value will be mostly gone by earnings announcement, but it will boost the price of both the call and the put regardless of the direction. Also, when the stock takes a swing either positive or negative the IV will increase and again the prices will increase as well.
Options have significant risks that need to be understood before investing with them.
Disclosure: I am long P. I am long the 10c/8p May 19th strangle.