I don't like automated stops. Not the traditional, set a price at "X" kind of stops, as you more often than not get your shares swiped from you just before the stock goes your way.
But having firm stopping points is essential if you are going to survive in the market.
As options tend to be much more volatile than stocks, we often set stops that would choke a regular trader, but you need to discipline yourself to walk away from a bad trade, and sooner rather than later.
Before I enter a position (see "My Trading Policies"), I usually wait for an option to go the wrong way, as long as there isn't some actual reason for it, so I can buy it below my target.
When I enter a position I usually take a 1/10 position (1/10 of the total amount I intend to commit, which is never more than 1/10th of my total cash). If I am really, really, excited, I take 3/10, but that has to be something like an FDA approval or misunderstood earnings reports.
With my initial position, I usually don't sweat the stop. I let it go. If it heads up fast, that 1/10 may be all I ever buy. If it heads up slowly or trends sideways, as long as nothing has changed my opinion, I will buy a little more, sometimes the same day, but usually one or two days later.
At 2/10 in, I will usually let it ride a bit. If the stock goes way down and I think the market is wrong (Chesapeake Energy Corp. (NYSE:CHK) for example), I will let it go all the way down to half and double down, reducing my basis to a 25% loss. At that point, I set a 20% stop as I will be out 60% on my initial 2/10 and 20% on my second 2/10, which is more than enough to lose on one position!
Once I am 4/10 or more into a position, I generally will set a stop of around 20%, but I am flexible in that I watch the broad market and will take a bigger loss if my stock is just trading with the market or the sector. My tolerance depends very much on the 50 and 200 dma's, and I will tend to hold for a bounce off a line a bit past my limits. On an intraday basis I also use Bollinger Bands and will tend to respect the 60 minute bands.
Going the other way, once I make 30% on a position, I set a very tight 20% (of the profits) stop. At that point I may raise the stop a nickel for each dime of upward movement to allow a little more flexibility while making sure I gain ground consistently. I do not add to a position that is more than 30% positive, rather I will roll to the next bracket if it's appropriate.
There are very few times I make it to 10/10 on a position. CHK is one example as I refused to accept it going up and kept buying what I considered very cheap puts. But Sunoco Inc. (NYSE:SUN) $75 puts are a better example, as that stock drifted down nicely since our initial pick, allowing us to add a little each day.