I prefer to enter option trades with 45-60 days left until expiration; this is the sweet spot for Theta decay. I prefer to trade only monthly option cycles at this moment.
For example the current May options have 38 days to expiration; The June options have 66 days until they expire. So for me I’m likely to wait 6 days until my window opens for placing option trades.
I manage trades at 50% of the max potential profit – if they haven’t reached that target I let them work until they either hit 100% loss of the current premium or I give them a second look at around 21 days until expiration. As days go below 21 days I’ll give in and try to take 30-40% of profit – eventually around 10 or so days I’ll take what I can get even a scratch (break even) or small loss.
I recommend you watch this video from Tastytrade that asks – “Is it better to trade 15 days until expiration or 45 days?”
The market measure starts at around 4.5 minutes in..
Here’s a screen shot showing the results of 2 underlyings (AMZN and SPY) and using strangles which should have a 68% chance of success
As you can see using 45 days to expiration was a lot more successful. In terms of total profit it was almost 3x the profit for AMAZON, and 2,5k in profit versus -892 in the SPY
The biggest loss taken was almost cut in half with duration as well.
The idea is very simple –
1) Setup a trade with 70% chance of success
2) Manage the trade at 50% of max profit.
3) Enter the trade with 45-60 days to expiration.
with the above perimeters and having a large number of occurrences. You should experience 80% or even better as a percentage of winning trades.