Say, for instance, that you've set up a delta-neutral straddle (i.e. you are long volatility, short time decay) and want to dynamically hedge your gamma in order to offset losses due to theta. Is there a commonly used framework that compares the cost of rebalancing the hedge against the growing theta exposure?
I recall reading that a 1 s.d. move represents the break even point between gamma and theta, so that or a slightly larger move that would cover both theoretical loss due to time decay and the real, fixed execution cost associated with rebalancing seems like a reasonable place to start, but I'm not sure why that would be the only place to do it.