1)Everytime you start having a nightmare, you become lucid enough to either get yourself into a nice dream, or to wake yourself up completely.
or
2)To let the nightmare play out and actually confront the things in the nightmare.
I always do #1 lol. 
Well, it depends on whay your view of dreams really are. If you agree with me on that dreams are your every-day happenings “retold” with symbols and affected of your subconsisous view of it, then you will maybe understand that it in most cases is better to “make friends” with your nightmares than to run from them, as they really represents a part of youself or a part of your life.
The way of handling nightmares, which is recommended by LaBerge (you know who he is, right?), is to confront yourself with the nightmare. If you dare to, then. If a nightmare is chasing you, turn around, and expose it to you. Then it will become less “dangerous”, and turn into a friendlier form. If this is not enough, try showing signs of your love to the beast. Go towards it, pet it, say friendly words. When the monster has turned into a form you can feel comfortable with, talk to it. Ask what it is, and what it wants you.
You could also try using your lucid-dreaming abilities to make the nightmare vanish in any way, or fight it. But it is only ways of fleeing from the monster, actually. Maybe it helps 
Dreams are excellent grounds to confront your fears. I think that there should be a 3rd option that’s a crossroad between the other two. Gain enough lucidity to confront your fear and ask what they represent and why the entity is teasing him/her. 
Well,it depends what would you consider a nightmare.
In my case one kind of nightmare would be a dream about monsters,dark places ,vampires and girls saying “no”(heh).This kind id be trying to confront.
But there are other kinds-dream about your parents dying,your girlfriend cheating on you in front of your eyes and stuff like this.Id rather have first kind alot more.A lot!
For the last-id choose change right off,it makes my head really sick afterwards and i dont wish such a dreams regardless what profits it may be giving me(and i doubt there would be any cuz i would wake up angry like hell).
just few thoughts:)
LOL Jack 
yeah nightmares can be annoying. I can wake up out of a dream if i want but sumtimes im just to lazy and tired to wanna wake up out of a scary dream so i just let it go. But which is scarier. Having the nightmare or knowing something that scary was manifested by you. I dunno but it doesnt bother me eitherway except for one nightmare. Its one of the kind that lik messes up ur emotions by lik tricking them. The after affect of it im pretty messed up. I dunno the dream isnt really scary its more lik i have no clue about it and i want a good LD so i can question it and find out its deal cus i think there is sumin definatly symbolic since i had it more than once.
I don’t find it a bad thing that a nightmare is manifested by you. But then again how can you tell if you genuinely made the monster representing part of yourself. Thinking about it, I should file a lawsuit against xenomorphs regarding copyright policies in my nightmares.