exiting option trades

when should I exit my option trade? tldr: there is NEVER a set answer, you need to research the underlying market effect you're trading to make a logical choice. hey everyone - got a dm from someone asking about this and figured it might help others to share here. realistically speaking, the process is actually really easy - all of the work is done determining the "points". first, this approach doesn't pertain to "options" or any specific asset. they're general concepts. i simply need to answer (4) questions every single time BEFORE i enter my trade. 1. Profit management. If things go how I want, how will I manage the profit? 2. Loss management. How do I know when my idea is wrong and I should exit? 3. Thesis management. When is my idea wrong? there are instances where our idea may be wrong but our profit or loss targets haven't been hit. 4. Duration management. How long do I plan to spend here? (this is VITAL for options traders where duration is a critical decision we make). the natural follow on is, "yeah cool - when do I pick this stuff?" and that's where ALL the work is. for me, determining these management points depends entirely on the profit mechanism. for example, if I'm trading an upside breakout strategy, I'm going to manage the profit in that trade FAR differently than if I'm playing a longer-term momentum play. the ONLY way to logically answer these questions is by doing the fucking work. you need to take a really close look at the profit mechanism you're attempting to trade and how it behaves - that lays the foundation for decisions. for example, if im shorting vol through earnings. the profit mechanism im attacking is variance risk premia (propensity for IV to trend higher over IV). to better understand this PM, I might measure HOW IV and RV behaves through earnings. I might find that often after the release, the next open typically still contains a lot of volatility that ultimately bleeds out throughout the day. that naturally informs me that I likely don't want to close the trade right after the open. etc. some other thoughts: \- think outside the box. none of these are binary. for some of my profit management approaches actually include ADDING risk and scaling in - while moving stops, etc. \- avoid broad platitudes. exiting all short strangles at XX max premium is never going to be optimal. that doesn't mean it may not work and for some that simplicity might be worth it, which it totally cool. at the professional level - i certainly do care.