My lobo that is very similar to yours except it is orange and purple, goes through the same experience. I find that when it is bothered or moved around it does what you have described but always bounces back. I keep mine at the bottom of a 24" tank under the 6 bulb ATI Sunpower with moderate to low flow and minimal feeding. Awesome shape and color by the way.
I'm having a similar problem now with my 2 lobo's. They are not puffing up. Nor are they receding any. They just stay retracted all the time. First noticed a couple of weeks ago. Thought they may just be going through a "change" but now getting a little concerned for them. Odd that this is happening to both of them. Both placed in the bottom of the tank. Previously healthy and growing for quite some time. Nothing has really changed in the tank. Parameters are good. Do you know what you did to get yours to expand again?
I have found lobos like this very tough to keep. I had a yellow one that only lasted days, a pink one that lasted a couple months, and a green one that I kept for about 6 months. They all ended up looking the same color in the end...white skeleton. These lobos have become one of the corals I "try" to stay away from now.
I'm with Jim on this. I can't seem to keep them. Not sure why, I have seen some nice ones in people's tanks but for me they all end up dying.
I have found that Lobos are very light sensative.The wifes tank has three in it which she's kept for sevral years and she refuses to move them once she found the right level.It looks to me like your experienceing alittle light shock.They do very well in low flow and almost a shaded area.Feeding it mysis will give it a lipids boost and won't hurt it.If you have Oyster feast try target feeding it and keep it in low light,I would also add some iodine to the frag tank over doing an aggressive dip.Just my .02 Loguls iodine will do wonders !!