Back in November, someone wrote the CBOE's "Ask the Institute," asking if there was a scientific way to manage condors. This person had noticed that some managed using the deltas, as I mostly do, and some managed them using a percentage move away from the entry level. Some used other measures.

The Institute's authority wrote back with an "emphatic, 'No!'" There's no scientific method. I agree. I tried to identify a cut-and-dried method of managing the iron condors that are the stable of my trading portfolio right now, and I'll try to do that as I vary my trades, too. Still, despite all my efforts, I'd also have to agree with the expert's assertion that there's neither a "best way" nor a scientific way of managing all trades all the time.

For example, imagine that you're trading a calendar on a hypothetical equity, and your plan is to adjust when prices move to the expiration break even. If you're on think-or-swim's platform, you can read that expiration BE from the risk analysis graph. If you have OptionVue, you can do the same. On BrokersXpress, you'll have to eyeball the level using the position analyzer graph. With some brokerages, you might have to do the calculations yourself, to the best of your ability, estimating what volatilities of the back-month option will be at expiration.

You have a plan, and it's cut and dried, right? But what happens if price is behaving nicely, staying under the calendar's characteristic tent shape, inside the expiration BE's even if it is edging just a bit toward the upside BE. Then, three minutes before the close of trading one day, a rumor hits that an industry peer will be reporting early, and reporting with strong numbers. The price of your underlying shoots up in sympathy, too, with some shorts speculating that a good report by the peer will bump up all component stocks in the industry group and rushing to cover their short positions. Suddenly, with one minute to go, prices have moved to and a little beyond the expiration breakeven. Do you adjust?

It's not such a cut-and-dried decision now, is it, when this little short-covering rally may or may not hold the next day? Imagine that the end-of-day run-up has brought prices right to the 200-sma and the exact level of a prior upswing that held as resistance. Do you adjust or do you decide to take a risk and wait until the next morning, letting the news shake out overnight?

Does it make a difference whether you have a $200,000 account and have bought only 2 contracts of that calendar, or whether you have a $5,000 account and have bought 2 contracts? Consider what's going on in your at-home or work life, too. Would your decision be influenced if you were due at the dentist bright and early the next morning to have a root canal and a crown? Even if you've downloaded your trading platform's mobile version onto your Blackberry or iPhone, I doubt you're going to be able to trade while getting a root canal.

Maybe, instead, you're a full-time trader and can watch the open. You trade futures, too, and know how to beta weight your position so that you can hedge with the appropriate futures. Perhaps you've seen this competitor, a low-capitalized company with illiquid stock, try to pass off bad earnings as good earnings, reporting after hours before the scheduled earnings release. You know that its supposed good news often isn't as good as the rumors that tend to fly and that these gains are often reversed the next day. Does that influence your decision?

Consider your own trading style before you decide to adhere to or fudge a little on your trading plan. Are you a die-hard, live-by-the-rules kind of person, and you know that using a little good judgment this one time won't threaten your trade management style? Or, have you recently fallen into a habit you're trying to break, of following your instincts, acting on what you "know" will happen, and letting losses get too big? If your positions have been hit one time after another, perhaps it's more important that you show yourself that you can be trusted to follow your rules or guidelines than it is to do anything else. Trust needs to be reestablished.

So, I'm sorry, but there is no right or wrong in this situation or in many situations we traders encounter. There's no "best," no science that's going to help. It's just you and your decision, you and your decision's effect on your account size and your ability to trust yourself as a trader.

What is important is that you follow your guidelines most of the time. You can't be a person who adjusts iron condirs when the absolute value of the delta on a sold call or put reaches 20-22, and then, when that point is reached, suddenly decide that you're going to change your plan to adjusting when those absolute values reach 30. That's not using a bit of art. That's totally abandoning your plan. Whatever art you introduce into your trading, you never, ever let a loss become unmanageable from either a financial or a confidence standpoint.

If you use your knowledge of the past behavior of your underlying after its peer reports, the knowledge that shorts were probably just covering ahead of the report, your ability to stay in front of the computer and react, your awareness that you've got many profits under your belt, and your confidence that the small size of the position will not greatly impact your trading account, you might decide to take a deep breath and watch overnight and in the early trading period the next morning. You're going to be either right or wrong, but you and your trading account will be okay.

If that calendar represents 70 percent of your trading capital and your confidence is already beaten down after a number of trading losses in a row, and your underlying, like its peer, has a small capitalization and illiquid stock and options, you're either going to be right or wrong, too. In this case, you're not going to be okay whichever way it goes. If you don't close the position for the planned loss, you're taking too big a risk, one not appropriate to your situation.

I'm not suggesting that you can say you're managing your trades by one method, and just willy-nilly change that methodology whenever it's time to take a stop. That's going to get you in big trouble, particularly if you're trading a lot of iron condors but also with all trades. Using the iron condors as an example, here's the truth: if you adjust or hedge early, such as when the absolute values on the deltas of your sold strikes reach 20-22 or maybe even 16-17, you're going to take smaller losses but take them more frequently. If you adjust or hedge late, such as only when the absolute value of those deltas is passing 30, you're going to take much bigger losses, but you're almost never going to take those losses. It evens out, as long as you're the kind of person who can accept the P/L swings when you occasionally take those big losses. What doesn't even out, however, is if you're the kind of person who typically adjusts early, so that you adjust more frequently and either take small losses or cut down your profit potential more frequently and then, once or twice a year, let the absolute value of the deltas on those sold strikes run way up, thinking you can stand it. Then you cave, right before the markets reverse. You've just taken a loss way out of proportion to your average gains, and that doesn't even out.

As part of your plan, recognize that, no matter how many guidelines you build into that plan, you're going to encounter times when a little art must be applied. Never let losses mount above that acceptable for either your trading account or your confidence level while you're doing a little artwork, but do accept that you'll have to practice a little art with your science now and then. I'd rather have rules. Ironclad rules. But that's not the way of the trading world. It's our responsibility as traders to accept that it's not.

Note from Linda: Due to my own error, this article was originally uploaded in the Options 101 newsletter. Because I know that many experienced options traders stay with this column without checking out the Options 101 one--although there's some good stuff there, too--I also uploaded it to its rightful place.