So it finally happened. 27 % draw down on the nest egg in a day. I am premium seller. Work full time as IT consultant, travel M-Th and juggle the investment. Feel terrible. Canât believe could get into such a big hole after having 11 month of wining streak .Some how got through the day at work. Felt like total shit all evening. Sat down for couple of hours and mulled about what happened . After frustration, anger and kicking myself phase, I thought about the learnings / improvements/next steps: 1. Better Risk management â Will create a risk model using Black Scholes model. Use this model to simulate the future market scenarios and monitor the risk everyday for the period position is held. 2. Entry & Exit pointâ Will incorporate Economic events, fundamentals and TA (even though a rookie at TA). Backtest to determine the optimal exit point for losing positions 3. Back testingâ Back test the strategy on underlying and the option data before entering the position 4. Be less greedy and more patient - Cut down the premium collected. 5. Never chase the market- If market is moving against me , admit that I am wrong and move on.â I can believe it went xyz % against me .. this is so not possible fundamentally â¦ tomorrow it will move in my favor .. will make the adjustment/exit tomorrow..â so typical 6. Always, always , always cut loses- Have read this in every other post on ET and in all the popular booksâ¦.MILLION timesâ¦ but still human nature ..easy said/read than done ..need discipline 7. Complacency Check- Just because it worked for so many months it does not imply that it is going to work for this month. I am not saying that implementing above points would be the Holy Grail. I am an engineer ( BS mechanical Engineering and MS Industrial Engg. ) but solving this problem is such a big challenge. Not sure what the litmus test is 1 yr , 2 yr , 3yr 5yr. Few small whipsaws in the past 2 weeks and here I am down 27 %. But part of it might be the new instrument that I have adopted since last 3 months.. not sure . I worked through VIX in 50âs and 40âs earlier this year and was up 19% ( compounded) YTD on March 9 when S&P was down 24%. Cannot discuss with the loved ones why I look so upset. Cannot explain to them why the hell I am in big shit when Dow went up 600 pt in a week. ET is a good place to get a perspective from folks as they get it . After a devastating 08 and months of working hard to b/e in 09, gave back everything to the market. But I am not going to give up Would appreciate input/comments on the 7 points that I mentioned to enhance overall process in 2010.