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A Johnny account is limited to three pattern day trades in a rolling five business day period. This limit is in place until the rule is officially removed, which is expected within two months.
The rules are not similar to futures margin requirements. The changes are not about margin requirements but about limiting the number of day trades for accounts under $25,000.
PDT accounts, which are pattern day traders, are not being swept up by the street. The last day for firms to enforce the PDT rule is today. Most firms will start enforcing it tomorrow, but some may continue. If a trader violates the rule and does not reset, their account will be shut down. However, they can trade again with no restrictions the next day.
The rules involve adjusting positions based on implied volatility (IVR) and time to expiration. If IVR remains high and there are more than 30 days until expiration, traders should stay in the same expiration cycle and adjust their deltas. If IVR remains high but there are less than 24 days until expiration, traders should roll into the next expiration cycle and recenter their positions. If IVR drops below 30, traders should consider closing undefined risk trades as most of the premium has likely decayed. Defined risk trades can be held longer due to their reduced dependency on implied volatility.
Pattern day trading rules restrict traders who execute four or more day trades within five business days from trading in stocks unless they maintain a minimum account balance. This has historically made scalping in stocks difficult for retail traders with small accounts. However, the introduction of commission-free trading and micro futures has mitigated some of these restrictions, allowing for more flexible trading strategies.