This segment of Best Practices discusses the advantages and disadvantages of active management. When we actively manage strangles, we typically sell at 45 DTE and manage at 50% of max profit or 21 days. We do this because we can increase the number of occurrences. Plus, based on our study of managing strangles, there is a higher win rate and P/L per day when we actively manage our strangles opposed to holding until expiration.
However, one disadvantage of active management is that we miss out on the daily theta closer to expiration. Yet, we rarely capture this higher theta decay in our P/L due to gamma risk. Therefore, we like active management because it generates larger win rates and a larger profit overall.