Category Archives: Member Guide

The Art of 0DTE Trading: Strategy, Scaling, and Success

Every stitch tells a story in the trading world’s vibrant tapestry. The numbers, the charts, the highs and lows—all point to a narrative, a philosophy, a battle strategy. As disciples of the 0DTE trading strategy, our narrative is unique and powerful. It’s a tale of patience, resilience, and a razor-sharp focus on capital preservation. Let’s roll up our sleeves and get to the heart of the matter.

Unraveling the Numbers

Nearly 500 trading days provide an enthralling saga of trials, triumphs, and tribulations. From a humble beginning of $23,000, there’s a stellar ascent, culminating in an ending balance of $47,537.76—a whopping 106.69% in returns. But as tempting as it might be to rest on these laurels, our true strength lies not in the glaring headline figures but in the underlying strategies that steered the ship.

The Philosophy: Capital First, Profits Second

It’s a radical idea in a world that’s chasing profits: prioritizing capital preservation over potential gains. Yet, the journey from $23,000 to $47,537.76 is living proof of this philosophy’s potency. The data reflects a successful run and echoes our foundational principles.

The equity curve meandered during intervals like trade 10 to 64, 82 to 110, and 145 to 163, registering minor wins and losses. But what is the hallmark of our strategy? The disciplined response A 3.25% drawdown didn’t spell panic; it signaled a prudent reduction in position size until the account rallied to a new high.

Trading Small, Winning Big

The overarching blueprint is clear: trade with a scalpel, not a sledgehammer. This method underscores patience. Sideways equity movements aren’t markers of ineffectiveness but symbols of disciplined restraint. The strength of our strategy is embedded in its asymmetry. Regular trades offset losses, while periodic large wins skyrocket the account to newer zeniths.

Scaling and the Illusion of Linearity

The natural inclination when seeing success is to think, “Well, if a small position can yield X, a larger one will give me multiple times X!” This intuition, though tempting, can be misleading. In the intricate dance of trading, scaling one’s position doesn’t always mean a linear increase in returns. In fact, a larger position might amplify risks, bringing unforeseen volatility to your returns.

It’s pivotal to understand that as you scale, the dynamics change. The market is a fluid entity influenced by myriad factors. As we scale up, the very fabric of risk vs. reward shifts. Just because you’re placing a bigger bet doesn’t necessarily mean the odds will favor you proportionally.

Yet, the 0DTE strategy has an ace up its sleeve: the wisdom to scale judiciously. Instead of getting seduced by the potential of hefty returns, we tread with caution, understanding the nonlinear relationship between scaling and volatility of returns.

The Power of Persistence and Consistency

The road to trading mastery is littered with hurdles. Yet, as John C. Maxwell astutely observed in his treatise on leadership, “Persistence pays, consistency compounds.” Our trading strategy embodies this ethos. It isn’t about the grand slam but the relentless hits, time and again, that build an empire over time.

Staying vigilant is not just about watching the numbers. It’s about adhering to the core principles, even when the market throws a curveball. Similarly, persistence isn’t merely about staying in the game but refining your strategy with each play.

And then there’s consistency. It’s not glamorous. It won’t make headlines. But over time, it’s consistency that compounds your equity, transforming small gains into monumental successes.

Conclusion: Charting the Path Forward

Our 0DTE trading strategy is more than just about numbers or technical prowess. It’s a philosophy, a mindset, and a commitment. The journey from $23,000 to $47,537.76 is a testament to this commitment, but more importantly, to the power of strategy, discipline, and a never-say-die attitude.

As we navigate the unpredictable waters of the trading world, this analysis serves as a compass—a reminder of where we started, the battles we’ve won, and the promise of the horizons yet to be explored.

The market is a formidable adversary, but armed with the right strategy and the tenacity to execute it, victory isn’t just possible; it’s inevitable. So here’s to patience, scaling with wisdom, persistence, and unwavering consistency. The road ahead is long, but as history has shown, with the 0DTE strategy by your side, it’s a journey worth every step. Forge ahead, warriors, for the trading world awaits your mastery!

Pattern Day Trader Rule: How to Avoid It

In the dynamic world of day trading, the Pattern Day Trader (PDT) rule often stands as a daunting hurdle, especially for those with smaller accounts who wish to trade actively. This rule, designed as a protective measure by regulators, can sometimes feel limiting, especially when you’re eager to capitalize on short-term market movements. This becomes particularly pertinent when trading intricate strategies like the Butterfly on a 0 Days To Expiration (0DTE) event.

While understanding the PDT rule and the obligations it places on brokers is fundamental, there are clever maneuvers that seasoned traders employ to navigate these restrictions. This article will delve deep into one such tactic: the box trade. By judiciously employing this technique, traders—even those with modest account balances—can sidestep the constraints of the PDT. However, like all trading strategies, this approach comes with its own nuances and caveats, which we’ll explore in detail.

The Pattern Day Trader (PDT) rule is a regulation set by the U.S. Financial Industry Regulatory Authority (FINRA) that applies to stock market investors trading in margin accounts.


A Pattern Day Trader executes four or more day trades within five business days, representing more than 6% of their total trading activity in that same five-day period.

Main Points of the PDT Rule:

  1. Minimum Equity Requirement: If you are designated as a PDT, you must always maintain a minimum equity of $25,000 in your margin account. This includes both cash and securities. If the account falls below this threshold, you won’t be allowed to day trade until the minimum equity level is restored by depositing more funds or through equity appreciation.
  2. Trading Limits: If you are labeled as a PDT and have the necessary $25,000 equity, you can trade up to four times your maintenance margin excess (the amount of available funds in your margin account after subtracting initial margin requirement) in a five-business-day period. Your broker may issue a margin call or restrict your trading if you exceed this limit.
  3. Potential Restrictions: If an account’s net liquidation value falls below the $25,000 requirement, the trader will be prohibited from making any further day trades until the account is returned above this level.
  4. Removing PDT Designation: If you do not wish to be considered a pattern day trader, you must avoid making more than three-day trades in five business days. If you already have the PDT designation and wish to have it removed, you typically must refrain from day trading for a specified period and may need to request your brokerage.

Who Does It Apply To?

The PDT rule applies to U.S. stock traders with margin accounts. It does not apply to cash accounts, where you pay in full for all the securities you purchase. That said, cash account traders need to be aware of the T+2 settlement rule, which means trades take two business days to settle, and trading funds aren’t available until settlement.

Rationale Behind the Rule:

The rule was implemented to protect individual investors from taking on too much risk. Day trading inherently carries a high degree of risk due to the volatility and quick changes in the market. By requiring a substantial equity buffer and limiting excessive day trading, regulators hope to prevent significant losses for retail investors.

If you’re considering day trading or believe you may be affected by the PDT rule, it’s important to be well-informed about the requirements and consult your broker or financial advisor for guidance.

Broker Discretion

The Pattern Day Trader (PDT) rule, as set by the Financial Industry Regulatory Authority (FINRA), is mandatory for all brokerage firms to implement for customers trading in U.S. stocks using margin accounts. Brokers don’t have discretion over applying the rule itself; it’s a regulatory requirement.

However, brokers can have some discretion in certain areas:

  • Designation: While the rule defines a pattern day trader as someone who executes four or more day trades within five business days, brokerage firms can potentially be more conservative and label someone as a PDT with fewer trades if they believe the client is taking on excessive risk.
  • Notifications and Warnings: Some brokerage platforms might warn traders when they are approaching the limit, while others might not provide such notices.
  • Enforcement and Restrictions: If an account falls below the $25,000 threshold, a broker must restrict the account from further day trading until the minimum equity is restored. However, how the restriction is implemented—whether immediately or with a grace period, and the manner in which it is communicated to the client—can vary by broker.
  • Exceptions and Appeals: If a trader inadvertently exceeds the PDT limits in certain situations, some brokerage firms may grant a one-time exception upon a client’s request. The specifics of this process and how lenient a firm is with such exceptions can differ between brokers.
  • Margin Calls: The way margin calls are handled, regarding deadlines for meeting the call and communication methods, can vary among brokers.

While brokers must implement and respect the PDT rule, they can offer educational resources, tools, and features to help clients understand and navigate it more efficiently. If someone is concerned about the PDT rule or its implementation at their brokerage, they should directly communicate with their broker for clarity.

The Inventive Ways Traders Avoid the PDT Rule

While the Pattern Day Trader (PDT) rule is clear about the limitations it places on traders, there are still legal and legitimate strategies and tactics traders can employ to continue trading actively without being constrained by the rule:

  • 1. Use Multiple Brokerage Accounts: One common way to circumvent the PDT rule’s constraints is to open accounts with multiple brokerages. If a trader has accounts with three different brokers, they could make three-day trades in each account over five business days, for nine-day trades, without triggering the PDT rule in any single account.
  • 2. Trade in a Cash Account: The PDT rule applies to margin accounts. You’re not subject to the rule if you trade in a cash account. However, you’ll need to be aware of the T+2 rule, which means trades in a cash account take two days to settle. So, if you use all your cash on Day 1, you won’t be able to use that same cash to trade until Day 3.
  • 3. Swing Trading: Instead of day trading (buying and selling on the same day), consider swing trading, where you hold positions for several days or weeks. This approach doesn’t fall under the PDT rule and allows you to take advantage of larger price movements.
  • 4. Trade Options: The PDT rule applies to stocks and stock market index options, but trading options can sometimes require less capital. However, they also come with their own set of risks and complexities. Be sure you understand these risks before diving into options trading.
  • 5. Trade in Futures: Futures trading is not subject to the PDT rule. Futures can be traded with leverage similar to margin in stock trading, but they also come with significant risks. Ensure you understand the specifics of futures trading and its inherent risks.
  • 6. Move to a Proprietary Trading Firm: Some proprietary trading firms might offer ways for traders to day trade more freely, but they often have their own rules and requirements. In some cases, you might need to deposit capital, or the firm might take a cut of your profits.
  • 7. Consider International Brokerages: If you’re not a U.S. resident, you might consider trading with an international brokerage not subject to U.S. regulations. However, this comes with its own set of challenges, including potentially less regulatory oversight and protections.
  • 8. Adjust Trade Size: To ensure that you don’t run afoul of the rule, you can adjust the size and frequency of your trades. This might mean making fewer but larger trades, maximizing potential returns without exceeding the trade limit.

Remember, while these strategies can help navigate the PDT rule, they come with risks. Always ensure you understand the risks associated with any trading strategy and stay informed about the regulations in the jurisdictions in which you’re trading. Consider seeking advice from a financial advisor or professional before significantly changing your trading strategy.

How 0-DTE Traders Avoid PDT with the Box Spread:

A box spread sometimes called a “box trade” or “long box”, is an options strategy that involves holding a bull spread (long call and short call at different strike prices) and a bear spread (long put and short put at different strike prices) simultaneously on the same underlying asset with the same expiration date. In essence, a box spread is composed of four options contracts:

  • Buy a call option at strike price A.
  • Sell a call option at strike price B.
  • Buy a put option at strike price B.
  • Sell a put option at strike price A.

The box spread should generate a risk-free arbitrage opportunity when set up correctly. The profit or loss from the box spread is known from the outset, which is the difference between the strike prices minus the net premium paid or received.

Using the Box Spread to Avoid PDT:

As you mentioned, if a trader has an existing vertical spread (like a bull spread or a bear spread) and wishes to lock in the current P&L without closing the position (thereby triggering a “day trade” under the PDT rule), they can do so by executing the opposite spread, essentially creating a box.

For instance, if a trader has a bull call spread (long call at strike A, short call at strike B) and wants to lock in profits, they can initiate a bear call spread (short call at strike A, long call at strike B) on the same underlying asset with the same expiration date. This will neutralize the potential profit and loss from the initial vertical spread, and both spreads can be allowed to expire worthless, avoiding the need to close any position.


  • Costs: While the box spread might offer a risk-free arbitrage opportunity in theory, traders need to be aware of transaction costs, including commissions and bid-ask spreads, which might eat into the potential profit.
  • Liquidity: Box spreads require a liquid options market. If the options aren’t liquid, the bid-ask spread might be too wide to make the strategy viable.
  • Assignment Risk: If any of the short options are assigned before expiration, it could disrupt the strategy. Early assignment, particularly for American-style options, is a risk to consider.
  • Regulatory Scrutiny: Constantly employing strategies that circumvent rules might draw the attention of regulators or brokerage compliance teams. Even if you’re doing technically within the rules, it’s always a good idea to ensure that your broker understands your strategy and is okay with it.

In conclusion, while box spreads can be a clever way to work around the PDT rule, they also come with their own risks and challenges. It’s essential to understand these intricacies thoroughly before engaging in such strategies.

Zen and the Art of Hedging

The Art and Purpose of Hedging: From Reactive Emotion to Proactive Strategy

Hedging, in the realm of trading, is akin to taking an insurance policy on your trade. Like homeowners buy insurance to guard against unforeseen calamities, traders use hedging techniques to protect their positions from unexpected market movements. However, not all hedging methods are created equal. Let’s explore why traders hedge and why a proactive, strategic approach always trumps reactive, emotional hedging.

1. Defensive Hedging: The Emotional Safety Net

Imagine this: instead of moving in your anticipated direction, you’ve placed a trade that starts going south. Panic sets in, and as an instinctual reaction, you hedge to offset potential losses. The thought process here is simple: if the trade continues its adverse journey, the hedge will provide some respite. But there’s a darker side to this approach.

Defensive hedging can:

  • Complicate your trading plan: Adding layers to an already losing trade can make it difficult to keep a clear perspective.
  • Increase costs: Hedging isn’t free. You’ll incur additional trading costs, not to mention possible overnight funding charges.
  • Tie-up capital: More positions require more margin, reducing liquidity.

The biggest concern? The market could swing so that both your initial trade and your hedge result in losses. This isn’t hedging; it’s doubling down on risk.

2. Proactive Hedging: The Strategic Lock-In

Contrast the above scenario with this: your trade is in profit, and based on your strategy or market signals, you decide to hedge to lock in some of those gains. This is proactive hedging – the structured, planned approach. You’re not hedging out of fear but strategy.

Benefits of proactive hedging:

  • Locks in profits: Like booking partial profits while letting a trade run.
  • Protects against reversals: Insulates your position against adverse movements, especially in volatile markets.
  • Provides peace of mind: Knowing you’ve taken steps to protect your gains can offer emotional and financial comfort.

Hedging vs. Exiting: Which is Superior?

It’s essential to consider an even more basic question: should you hedge or exit the trade? Exiting a losing trade based on preset criteria is often cleaner and less complex than introducing a hedge. Throwing a hedge into a losing trade might feel like a solution, but it can compound the problem by increasing risk and complicating decisions.

The Ideal Mindset for Hedging

Hedging should never be a knee-jerk reaction. It needs to stem from a place of strategy, not emotion. Remember:

  • Have a clear plan: Know when and under what conditions you’ll hedge.
  • Don’t use hedges to “rescue” bad trades: Accepting losses is a part of trading. Don’t complicate things further with emotional decisions.
  • Stay informed: Understand the costs and implications of your hedging strategies.

Zen and the Art of Proactive Hedging in the 0-DTE Strategy

In the tranquil pursuit of trading, like the rhythmic motion of a motorcycle journeying through a winding road, the interplay of anticipation and reaction lies. As we traverse the 0-DTE strategy, the scenery shifts rapidly, asking of us a certain proactive wisdom. Let’s muse upon this Zen-like approach to hedging, discovering the quiet power of intention over hurried reaction.

Understanding the Journey: The 0-DTE Landscape

Much like the intricate machinery of a motorcycle, the 0-DTE strategy’s essence lies in its ephemeral nature. Within this fleeting timeframe, market movements can be swift and unpredictable. But, reminiscent of a seasoned motorcyclist who senses a bend before it emerges, proactive hedging can equip us to ride the wave gracefully.

1. The Box Trade: Locking in the Moment

Imagine cruising down an open road and suddenly being enveloped in a moment of absolute serenity. You wish you could bottle this moment to keep it safe. In trading, the box trade serves a similar purpose. When your butterfly reaches its zenith, the box trade is like capturing that perfect moment. Effectively transforming your position into a risk-free state helps lock in profits, ensuring that your once ephemeral gains have tangible permanence.

2. Synthetic Short & SPY Shares: The Gentle Counterbalance

As one rides through contrasting terrains on a motorcycle journey, a counterbalance is often required to maintain harmony. The synthetic short position or holding SPY shares acts as this counterbalance in the 0-DTE strategy. When you’ve tasted success and the path ahead seems uncertain, these positions add a layer of protection. They temper the excitement with wisdom, ensuring that even if the market were to make a sudden turn, you’re poised and balanced, your gains secured in the dance of gamma hedging.

Mindful Exit: The Ultimate Zen Choice

While hedging has its poetic beauty, there’s an even purer form of Zen in knowing when to dismount and step away. Exiting a trade, especially one veering off-course, embodies the Buddhist teaching of detachment. Instead of complicating the journey with additional hedges (each with its own karma or costs), sometimes the path to enlightenment lies in letting go.

The Zen of Proactive Hedging

Hedging, when approached from a place of calm foresight, transforms from just another trading tactic to a profound exercise in mindfulness. As with the intricate details one observes in the throes of a motorcycle’s maintenance, the nuances of proactive hedging demand attention, respect, and, most importantly, understanding. The 0-DTE strategy, with its fast-paced nature, offers an excellent canvas to practice this Zen art, reminding us that in the midst of volatility, there lies an opportunity for profound equilibrium. Remember, it’s not just about predicting the bends but dancing gracefully through them.

Butterfly Options Strategy & Secrets to Success

If you follow the options trading strategy and advice shared here, you will experience a pinned trade about 10-15% of the time. The ideas here do not guarantee a pinned trade. However, they do describe a way to increase the probability that you will get to a pin.

This post will provide tips, techniques, and knowledge that will help you achieve a greater profit with the 0-DTE strategy. Each of these tips are valuable, but in the absence of developing your skill around these things, they are pretty much useless information. These tips aren’t some kind of magic butterfly option trading secrets that transform your results with little or no time invested on your part.

In other words, if you think you are going to achieve a lasting performance boost, without taking the time to test, build routines, and truly make this information part of your trading playbook, then there’s really no need to read the following…

If you can truly and thoughtfully incorporate this aspect of options butterfly strategy into your own approach, however, it can support better outcomes.


The number one thing that will increase the probability of getting a pinned trade is the width of your butterfly trading strategy. A 15 wide fly has a much greater chance at a pin than a 10 wide, and a 20 wide a better chance than a 15.

Your return on capital will improve if you set your target area in the leading 1/2 of your fly, instead of the short strikes. So, your analysis should reflect this. In other words, you have a greater degree of confidence that this is where the price is destined by the end of the session.

You also can increase your odds dramatically by getting a good price, and risk to reward. Your 15 wide spread that only costs $1 will have a greater probability of profit than one that has a cost of $2.50. The former risk to reward is 14, while the latter is 5. The sweet spot for me is 6-8.

I call this the Higher and Wider principle of the butterfly option trading strategy.

Higher-Wider Graphic

When placing your short strikes, you shouldn’t be placing them based on where you think price will end up. Because quite frankly, it is unknowable where the price will end up.

Trying to guess a specific strike price as the landing area will eventually create negative feedback. Think more in terms of overlapping areas, using the area from your short strikes all the way out to the break-even point nearest to your current price as your target (yes, it is a big target — the bigger the better). And try to position that so it overlaps where you think the price will end up.

Higher-Wider Target

Higher is Better Given the Same Width

If you can get a better price on your spread, it is going to sit higher relative to the zero profit line. Therefore, it can provide both a bigger reward to risk, but also a wider range of prices between your break evens. This will increase your probability of profiting from your butterfly strategy for options. And this is why I often hang limit orders for the price I want, rather than the price that is available when I input the strategy parameters.

In this example, both of these have a 15 wide spread, but the bottom one has a much better risk to reward (5 vs 9). Consequently, the profitable range is bigger, a greater range in prices will work, AND the overall potential profit is greater.

This is why I try to get the best price I can. It is also why I try to reduce my cost basis sometimes by adding an additional position if the price of the spread drops significantly, but is still a viable trade.

Higher is Better Give Same Width

Gamma Risk Favors Wider Fly

The gamma risk of a narrow fly, or slope of the profit curve, is much steeper on narrow spreads compared to wider spreads. The wider fly has a smaller risk due to the flatter profit curve with lower gamma.

Basically, this means that changes in market price on small gamma does not affect the change in price of the value of your fly spread. Therefore, wider flies are better and more stable from a profit management view.

Gamma Risk Favors Wider Fly

Probability of Touch (PoT)

I found that the ideal probability of touch measure when entering a fly, is that the nearest strike is > 67% Probability of Touch (PoT). At this distance, you will have about a 10-15% chance of a pinned trade. 70-80% seems ideal, but only if you can get a good risk to reward.

Most platforms will show you the PoT of a strike, some do not or it is hard to find. In general, the PoT is approximately 2X the delta of a strike.

Day trading options strategies are complex and nuanced. Even so, you have the power to study and incorporate effective processes into your trading playbook. This advice to boost the possibility of a pinned trade is just one part of a much larger process for truly taking control of your trading efforts.

Partner with expert coaches, evaluate your trading behaviors and learn how to continually optimize your strategy. Try 0-DTE today.

Probability of Touch (PoT)