Forgive my ignorance but I am new to the options game. I've been looking at this strategy and comparing it to an ATM straddle. Short 100 shares and buy 2calls at or around the strike you shorted. If the shares make a quick move down, you can profit before you hit the expiration BE point, and if they move up quickly, same thing. Otherwise it seems the downside BE is shorted price minus the cost of the 2 calls and upside BE is short price plus the cost of the 2 calls. Am I getting this right Is this the same thing as an ATM straddle only more complicated? And is it possible to profit from a quick move that has yet to reach the BE points? EX: LIFC just had downward move on positive earnings. It is now around 27.50. An ATM straddle for AUG would be a bid 3.00 ask 3.40. So maybe I could get it for 3.30. Downside BE is 24.10 and upside is 30.90. But what happens if the pps shoots up $2/share the next day so it would be 29.50. Would I have a profit? Conversly, if I shorted 100 shares at 27.50 and bought 2 AUG 27.50 calls for 1.80 my downside BE would be (27.50-(1.8*2))=23.9 and upside BE would be cost of two calls=31.10? With this second scenario a quick downside move would profit more than a straddle since the stock earns dollar for dollar and the calls only lose .5 (if delta is .5)? On the upside, it is better to have the straddle since you dont have the stock moving against you dollar for dollar. Is one strategy better for bullish or bearish? Or am I totally off base here? what about shorting 200 shares and buying 3 calls? :eek: Any help figuring this out would be much appreciated.