In his first book, Victor Sperandeo says that early in his career he traded the following strategy: XYZ is at 25. VS believes it will go to 21 so he buys a 90-day straddle at 25 for $4. If the stock rises to 27 he'll sell short 100 shares. The max loss is therefore $200. VS's idea is to maintain a 3:1 reward/risk ratio. If the stock goes to 21 at expiration, he'll make $600 ($600 on short stock sale, break-even on straddle). If it stays at 27/share he loses $200. However, what if the stock never advances to $27 but meanders along near $25? Would anyone on this board comment on when to cut losses on the straddle? Also, when is a good idea to take profits? Help is greatly appreciated. Thanks.
VS writes that it is a 95 day straddle and he "employed various strategies" to make profits. Without asking VS himself you can only apply your own risk tolerance and add another option stratagy to the straddle, or making it a directional trade by buying/selling stock and selling the call/put, or selling the straddle before the time decay increased or just accepting the loss.