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Yes, you can trade options on prop firms, but it is significantly less common than trading forex, futures, or equities. Only a select number of proprietary trading firms, typically more traditional and requiring in-person participation or professional licensing, offer options trading due to its complex risk profile. The popular online evaluation-based firms that dominate the market today largely avoid options because their automated risk management systems are not designed to handle the non-linear risks associated with options contracts, such as the Greeks (Delta, Gamma, Theta, Vega).
Table of Contents
- What is the Stance of Proprietary Trading Firms on Options?
- Why Do Most Prop Firms Restrict Options Trading?
- Which Prop Firms Do Allow Options Trading?
- What Are the Typical Requirements for Trading Options with a Prop Firm?
- Examining the Advantages and Disadvantages
- How Do Prop Firm Rules for Options Differ from Other Assets?
- Are Futures a Better Alternative for Prop Firm Trading?
- What Strategies Work Best When Trading Options with Prop Firms?
- How to Prepare for an Options Trading Evaluation?
- Frequently Asked Questions About Options and Prop Firms
What is the Stance of Proprietary Trading Firms on Options?
The landscape of proprietary trading is diverse, but a clear pattern emerges when it comes to options. The vast majority of modern, online-based prop firms—the ones offering instant funding challenges and remote trading—do not permit options trading. Their business model is built on standardized risk parameters, simplified evaluation processes, and asset classes with linear risk profiles like forex and futures. The focus is on a trader’s ability to generate consistent profits while adhering to straightforward rules like daily drawdown and max loss.
Conversely, a small subset of traditional proprietary trading firms does embrace options traders. These firms often operate more like classic trading floors, sometimes requiring traders to work from a physical office. They possess sophisticated risk management desks staffed by experts who can monitor and manage the complex, multi-faceted risk of an options portfolio. For them, a talented options trader is a valuable asset, but the barrier to entry is substantially higher, moving beyond a simple evaluation challenge to include professional qualifications and significant experience.
Why Do Most Prop Firms Restrict Options Trading?
The reluctance of most funded trader programs to incorporate options is not arbitrary. It stems from fundamental challenges related to risk, technology, and the very structure of their business models. Understanding these reasons clarifies why futures and forex remain the preferred instruments for these firms.
The Complexity of Risk Management
Options introduce a level of risk that is exponentially more complex than spot or futures trading. This is primarily due to the Greeks—a set of risk measures that quantify an option’s sensitivity to various factors.
- Delta and Gamma Risk: While a futures contract has a delta of 1 (moving one-for-one with the underlying asset), an option’s delta is variable. Gamma measures the rate of change of delta, meaning the position’s risk exposure can accelerate or decelerate rapidly. A prop firm’s automated system, designed to track linear profit and loss, cannot easily manage this non-linear risk.
- Vega and Theta Risk: Options are sensitive to changes in implied volatility (Vega) and the passage of time (Theta). A sudden spike in volatility or the approach of an expiration date can drastically alter the value and risk of a position, independent of the underlying asset’s price movement. Managing these variables across hundreds or thousands of traders is a monumental task.
A simple max drawdown rule is insufficient to contain the potential for a “gamma squeeze” or “volatility crush” event to wipe out an account, making it a poor fit for the automated risk protocols used by online prop firms.
Technology and Platform Limitations
The trading platforms provided by many online prop firms are optimized for the high-speed execution of forex and futures. Integrating a full-featured options chain, with all its strikes, expirations, and complex order types (like spreads, condors, and butterflies), requires a significant technological investment. The platform must not only display this data but also feed it into the firm’s central risk management system in real-time. The cost and complexity of developing or licensing and then integrating such a system often outweigh the potential benefits for firms focused on a high-volume, scalable model.
The Scalability Challenge for Evaluation Models
The evaluation or “challenge” model is the cornerstone of the modern prop firm industry. It’s designed to be a standardized, scalable filter to identify disciplined traders. The rules are simple: hit a profit target without breaching drawdown limits. This model breaks down with options. How would a firm set a fair evaluation? Restricting traders to only buying calls or puts is too limiting. Allowing complex spreads would require a human risk manager to approve and monitor each trader’s strategy, destroying the model’s scalability and low-cost structure.
Which Prop Firms Do Allow Options Trading?
While uncommon, opportunities to trade options with firm capital do exist. However, they are found in a different segment of the proprietary trading industry, one that functions very differently from the popular online challenge firms.
Traditional vs. Online Challenge Firms
It is crucial to distinguish between two types of prop firms. Online challenge firms offer remote trading, low-cost evaluations, and access to instruments like crypto futures, forex, and indices. They prioritize scalability and automated risk management. Traditional prop firms often require a physical presence (or are much more selective with remote traders), demand professional licensing, and may require a capital contribution. They have dedicated risk managers and the infrastructure to support complex instruments like options.
When searching for a place to trade options on prop firms, your search will lead you almost exclusively to the traditional category. These firms are looking for experienced traders to join their team, not just pass a standardized test.
A Look at Firms Offering Options Access
Firms that are known to have programs for options traders typically operate in the equities and equity options space. They function as professional trading organizations that provide capital, technology, and support in exchange for a share of the profits. Below are examples of the *types* of firms that may offer options trading access.
| Firm Type | Typical Requirements | Model |
|---|---|---|
| SMB Capital | In-person training, highly selective, focus on equities and options | Professional training and backing for elite traders. |
| T3 Trading Group | Series 57 license, capital contribution may be required | Broker-dealer affiliation providing access to professional platforms. |
| Maverick Trading | Membership fee, curriculum completion, structured pathway | Hybrid model focused on education and remote trading with strict rules. |
What Are the Typical Requirements for Trading Options with a Prop Firm?
Gaining access to a prop firm’s capital for options trading involves clearing a much higher bar than passing an online challenge. The requirements reflect the firm’s need to entrust a trader with instruments that carry substantial and complex risk.
Licensing and Professional Qualifications
One of the most significant hurdles is professional licensing. Many US-based firms that facilitate options trading are registered as broker-dealers or operate in affiliation with one. As a result, they require their traders to hold specific FINRA licenses. The Series 57 Securities Trader Representative Exam is often a mandatory qualification. This license demonstrates that the trader has the foundational knowledge required for professional trading, including rules and regulations. This requirement alone separates the professional trading world from the more accessible online challenge model.
Capital Contribution and Higher Costs
Unlike many online futures or forex prop firms that are “zero-capital,” traditional options firms often require a risk deposit or capital contribution. This contribution is not an evaluation fee; it is capital that the trader must put at risk alongside the firm’s capital. It serves as a “first loss” buffer and ensures the trader has skin in the game. These contributions can range from a few thousand to tens of thousands of dollars, representing a significant financial commitment from the trader.
Examining the Advantages and Disadvantages
For the few who can meet the stringent requirements, trading options with a prop firm offers a unique set of benefits and drawbacks that must be carefully weighed.
Potential Benefits for Skilled Options Traders
The primary advantage is leverage. Access to the firm’s capital allows a skilled trader to take on substantially larger positions than they could with their own retail account. This magnifies the potential for profit. Furthermore, these firms provide access to professional-grade platforms with superior execution speeds, lower commission rates, and advanced analytical tools that are often prohibitively expensive for individual retail traders. The profit splits, while shared, are applied to a much larger capital base, potentially leading to significant income.
Inherent Drawbacks and Limitations
The most significant drawback is the restrictive environment. Options strategies are often limited. A firm may not permit selling naked options, for example, due to the unlimited risk. All strategies must fit within the firm’s risk tolerance, which can stifle a trader’s creativity. The high barrier to entry, including licensing and capital contributions, makes it inaccessible to most. Finally, the pressure of trading with firm capital under strict supervision and rules can be a major psychological burden.
How Do Prop Firm Rules for Options Differ from Other Assets?
Rules for options trading in a prop firm setting are far more granular than the simple drawdown limits seen with futures. A firm’s risk desk will monitor exposure in real-time, imposing specific limits such as:
- Position Size Limits: Caps on the notional value or number of contracts per position.
- Strategy Restrictions: Prohibitions on high-risk strategies like naked calls/puts or unhedged positions. The firm may only permit defined-risk spreads.
- Greeks Exposure Limits: The firm will set maximum allowable levels for portfolio Delta, Gamma, Vega, and Theta. For instance, a trader might have a net Delta limit to ensure the portfolio remains relatively market-neutral.
- Overnight and Weekend Holding Rules: Stricter rules are often applied to positions held overnight or over the weekend to mitigate gap risk and volatility event risk.
Are Futures a Better Alternative for Prop Firm Trading?
Given the immense barriers and complexities associated with options in the prop firm world, many traders find that futures offer a more direct and accessible path to trading with firm capital. The characteristics of futures align perfectly with the scalable model of modern online prop firms.
Comparing Futures and Options in a Prop Firm Context
The choice between seeking an options-based firm and joining a futures-based firm comes down to accessibility, risk simplicity, and speed. Futures provide a streamlined experience that is highly compatible with the evaluation model.
| Feature | Options Prop Trading | Futures Prop Trading |
|---|---|---|
| Accessibility | Very low; requires licenses, high capital, often in-person. | Very high; remote, low-cost online evaluations. |
| Risk Profile | Complex & Non-Linear (Greeks). Hard to automate risk management. | Simple & Linear (Delta of 1). Easy to automate risk management. |
| Rules | Granular and restrictive (limits on strategy, Greeks, size). | Straightforward (max loss, daily drawdown). |
| Scalability | Low; requires human oversight. | High; model is easily scalable to thousands of traders. |
The Advantages of Trading Crypto Futures with a Firm like CoinContracts
For traders seeking leverage and opportunity without the institutional barriers of options trading, crypto futures present a compelling alternative. A firm like CoinContracts is engineered for this purpose. We provide a transparent and efficient path for talented traders to access significant capital. Instead of navigating the maze of licensing and capital contributions required for options, you can prove your skill in a straightforward evaluation environment.
With CoinContracts, you benefit from a clear rule set focused on what matters: your trading performance. Our model avoids the complexities of the Greeks and platform limitations, allowing you to focus purely on your strategy within the highly liquid and volatile crypto futures markets. You can trade with substantial leverage on our capital, keep a high percentage of the profits you generate, and operate from anywhere in the world. It’s a modern, accessible solution for ambitious traders.
What Strategies Work Best When Trading Options with Prop Firms?
If you do secure a position at a firm that allows options, you will need to adapt your strategies to their risk framework. The most favored strategies are those with defined risk. This means the maximum possible loss is known at the time the trade is initiated. Such strategies are easier for the firm’s risk desk to approve and monitor.
Examples include vertical spreads (bull call spreads, bear put spreads), iron condors, and butterflies. These strategies have built-in protection and a capped loss, making them far more palatable to a prop firm than selling undefined-risk straddles or naked puts. Directional trading by simply buying calls or puts may be allowed, but likely with tight size limits and strict stop-loss requirements.
How to Prepare for an Options Trading Evaluation?
Preparing for an options trading evaluation at a traditional firm is an intensive process. It goes far beyond simply practicing on a demo account. First and foremost, you must obtain the necessary licenses, such as the Series 57. This involves dedicated study and passing a proctored exam.
You should also build a verifiable track record of consistent profitability in a personal account, focusing on the defined-risk strategies that prop firms prefer. Be prepared to articulate your strategy in detail, explaining your edge, your risk management process, and how you manage your portfolio’s Greeks. The interview process is often as important as the track record itself, as the firm is assessing you as a professional risk manager, not just a trader.
Frequently Asked Questions About Options and Prop Firms
Can I trade options spreads with a prop firm?
Yes, but typically only at traditional prop firms that explicitly allow options. They will almost always favor defined-risk spreads like verticals and iron condors over undefined-risk strategies.
Is there an options trading evaluation account like those for futures?
Generally, no. The online evaluation model used by firms like FTMO, Topstep, and others is not built for options. The “evaluation” for an options prop firm is a more holistic process involving interviews, license verification, and a review of your past performance.
Why is it easier to get funded for futures or forex than for options?
It comes down to the simplicity and scalability of the business model. Futures and forex have linear risk that can be easily monitored by software with simple rules (e.g., max drawdown). Options have complex, non-linear risk that requires sophisticated, often human, oversight, making the online evaluation model unviable.
What are the profit splits for options prop trading?
Profit splits at traditional options firms can vary widely but are often in the 50% to 80% range for the trader. The exact split may depend on the trader’s experience, performance, and the amount of capital they contribute.
