Don't micro-manage strangle trades

Over the last few months I've learned a bit of a lesson on managing long strangles that don't turn a profit quickly. The one risk with strangles is that the stock stagnates, and the options decay too much before the stock makes a significant move. I took 3 big hits (AMZN, FDX and SLB) in December from stocks that lost their volatility right after opening the trades.

As explained in my (Long) Strangle Details post, I have learned a method of "legging out" of a strangle to help turn a profit even on a stagnating stock. The problem I have had is becoming too involved in the process. The whole purpose of this blog, and the strangle strategy, is to have something that can be traded only in the evenings with no or little intra-day monitoring. What I was doing was watching for a support or resistance point on the daily charts where I could leg out of the put or call. But then I would manage that using the intra-day charts. Basically I was trying to play a daily game on an intra-day schedule. My concern was that the location of the entry/exit points on the daily charts allowed too much stock movement, and therefore was risking too much in the option prices. But what I was really doing was not giving the stock room to move around, and wasting a lot of time and effort selling and buying back options with every little stock move.

So what I've gained from this is to continue finding my exit/entry points from the daily charts in the evening, and then stick to those. None of this intra-day, micro-management where I lose the big picture, and get caught up in every $0.10 move of the stock. That's why I pay money for good charting software ... so I can find those reversal points, and pick good entry and exit triggers. Because of the limitations of complex order types I still often need to enter an order or alert intra-day, but I'm not glued to the intra-day charts. And even those are triggers that I've pre-defined the night before, so there's no last-minutes decision making involved. Stock and option trading is about managing risk, not trying to eliminate it altogether. So this is a big message to myself "put in your trade criteria and stick with it!" :-)

So am I the only one that struggles with becoming a micro-manager of my trades? What tendencies do you struggle with in your trading? Leave a comment below and let me know.