"I don't need a tornado to make the weather exciting."

-- Sonni Skye, TV meteorologist

Just because it isn't officially "earnings season," that doesn't mean companies don't continue to report quarterly results on a daily basis. And every once in a while, when people's eyes are focused on the distant horizon, we'll get a 70-day degree in January or an April squall. It catches everyone off-guard, captures headlines and provides the momentary thrill of an expected event.

With that theme in mind, I scanned for companies that will be reporting earnings sometime in the next few weeks and whose options are relatively inexpensive. The thinking is, if the options are not bracing for anything but the expected, anything out of the normal range could result in an exaggerated response. Again, think of 100 people running for cover on what was supposed to be a sunny day: In getting long options at a pre-event discount, we will be there to sell umbrellas (or sunscreen) at profit.

The very real downside is that nothing happens and we are left holding an inventory of an eroding asset. But remember, the capital requirement for buying options is significantly less and has the potential to deliver multiple greater returns than trading the underlying shares. The key is to be selective, limit your risk and understand that these are short-term speculative trades. Whether they work in our favor or not, one should look to exit the trades within a day or two of the earnings release.

Calm Before a Storm?

Quiksilver ( ZQK) is slated to report second-quarter earnings on June 6. The company is expected to earn 27 cents per share, a modest 12% increase over the year-ago period.

The real key to this sea-and-surf apparel firm's report will be its guidance related to the integration of its March acquisition of France-based Rossignol, the well-known provider of skiing equipment and accessories. On its own, Quiksilver has been riding a wave of the cyclical resurgence of the beach/surf lifestyle, which seems to happen every third year, with the most recent same-store sales showing solid double-digit gains in May. If the company brings Rossignol into the fold and finds some of those magical synergies, it would provide a huge growth opportunity in terms of line of products and geographic distribution.

To be honest, some of the earnings and Rossignol excitement is currently reflected in the June options, which have an implied volatility (IV) in the low 40% range. This is a large premium above the 30-day historical average and slightly above the 36% six-month average. The stock price has reflected this optimism by gaining some 22% to $16.60 over the last 30 days. For this reason, I would look to buy the July options, which are sporting an IV in the 35% range.

One way to take advantage of this skew would be to establish a calendar spread. For example, sell the June $17.50 call for 40 cents and buy the July $17.50 call for 55 cents or a net debit of just 15 cents. The cost represents the maximum loss and the upside is unlimited. The best-case scenario is that the stock creeps higher, closing below $17.50 on June 17, rendering the short June options worthless and leaving the position net long the July $17.50 calls. How do you say cowabunga in French?

Net2Phone ( NTOP) has covered the full arc of the dot-com tech stock bubble and bust. Its shares rose above $80 in 1999, but now reside below $2 per share. But the time of voice-over Internet protocol (VoIP) is slowly, finally coming to be at hand.

On June 6, Net2Phone is expected to report a loss of 9 cents per share, wider than the loss of 4 cents a share in the year-ago period. Analysts expect little improvement in the bottom line over the next few quarters. But top-line revenue should continue to show double-digit growth, making this a prime candidate for a consolidation play.

With companies such as Cisco ( CSCO) and Sun Microsystems ( SUNW) clearly betting on the growth of Internet protocol for the transmission of all communication, Net2Phone could become a cheap and easy acquisition target. A perfect time to announce that it's looking at "strategic alternatives" would be next week's earnings release. If the $1.66 stock price is too rich, you can use the July $2.50 calls at a dime to make this a purely speculative play.

As one of the leading recruitment and job-placement firms, Korn-Ferry ( KFY) is a proxy for the nation's employment picture. The stock has recently lifted off a 52-week low, gaining 18% to $16.40 over the last three weeks on the belief that job growth has hit a steady and sustainable, if unspectacular, pace.

On June 8, the company is expected to show earnings of 25 cents per share, a 21% improvement over the year-ago period. Korn-Ferry has surprised to the upside three out of the last four quarters, and I think this time could also see an increase in full-year guidance. The options are near their cheapest levels of the year with an implied volatility at the low-30% level. With shares trading at $16.40, the July $15 calls at $1.70 look like a good limited-risk way to gain some upside exposure. The option has $1.40 of intrinsic value, leaving it only 30 cents away from its break-even point, and with over 40 days remaining until expiration, time decay should not be a factor for another 20 days.

Some other names I'm looking at for later next week include H&R Block ( HRB), National Semiconductor ( NSM) and Signet ( SIG).
Steven Smith writes regularly for TheStreet.com. In keeping with TSC's editorial policy, he doesn't own or short individual stocks. He also doesn't invest in hedge funds or other private investment partnerships. He was a seatholding member of the Chicago Board of Trade (CBOT) and the Chicago Board Options Exchange (CBOE) from May 1989 to August 1995. During that six-year period, he traded multiple markets for his own personal account and acted as an executing broker for third-party accounts. He appreciates your feedback; click here to send him an email.

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