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Yes, some proprietary trading firms allow options trading, but it is not common and is almost exclusively limited to futures options rather than stock options. Firms like Topstep and Apex Trader Funding provide access to options on futures contracts through specific platforms, but traders must operate under stringent rules, including restrictions on selling naked options and strict risk management parameters. Finding a prop firm that supports a wide range of stock options strategies remains a significant challenge for traders.
Table of Contents
- What Are Prop Firms and How Do They Operate?
- Why is Options Trading Uncommon in the Prop Firm Industry?
- Which Prop Firms Offer Options Trading?
- What Are the Common Rules for Trading Options in a Funded Account?
- How Do You Choose the Right Options Prop Firm?
- Are There Alternatives to Prop Firms for Options Traders?
- Frequently Asked Questions about Options Prop Trading
What Are Prop Firms and How Do They Operate?
Proprietary trading firms, often called prop firms, provide capital to traders, allowing them to trade larger positions than they could with their own funds. In exchange, the firm takes a percentage of the profits. This model creates a symbiotic relationship: the trader gains access to significant leverage and financial backing, while the firm profits from the trader’s skill without taking on the full risk of employing them as a salaried employee.
The journey to becoming a funded trader typically involves passing an evaluation or challenge phase. During this period, a trader must prove their profitability and risk management capabilities by meeting specific targets within a set of rules. These rules often include profit goals, maximum daily loss limits, and overall drawdown restrictions. Successfully passing the evaluation grants the trader a funded account, where they trade the firm’s capital and share the profits, often at a generous split of 80% or more in the trader’s favor.
Why is Options Trading Uncommon in the Prop Firm Industry?
While prop firms are abundant for forex and futures traders, those specializing in options are few and far between. This scarcity stems from the inherent complexity and risk profile of options contracts compared to the linear nature of spot or futures trading. Firms are hesitant for several key reasons.
First, the risk is harder to quantify. The non-linear payoff of options, influenced by factors like implied volatility (IV) and time decay (theta), makes it difficult for firms to implement the standardized risk management software they use for other asset classes. A sudden spike in volatility can dramatically alter the value of an options position in ways not seen with a simple long or short futures contract. Secondly, certain strategies, particularly selling naked calls or puts, expose the firm to potentially unlimited risk. Most prop firms build their business model on containing losses to a predictable level, a principle that naked selling directly contradicts. Finally, the required trading platforms and data feeds for options are often more sophisticated and expensive, adding an operational hurdle for firms to overcome.
Which Prop Firms Offer Options Trading?
For traders determined to find a funded account for options, the landscape is narrow but not entirely empty. The opportunities are almost entirely concentrated in the realm of futures options.
Firms Specializing in Futures Options
A handful of leading futures prop firms have extended their offerings to include options on futures. These firms leverage platforms that are already built for the futures ecosystem. The most prominent names in this space include:
- Topstep: A well-regarded firm that allows options on futures through platforms like TSTrader and Quantower. They have specific rules regarding options, including prohibiting the selling of naked options and expiring contracts in the money.
- Apex Trader Funding: Known for its flexible evaluation rules, Apex also provides access to options trading on futures. Traders must adhere to strict risk parameters, but the opportunity is available for those who can navigate their system.
- TradeDay: This firm offers a structured path to a funded account and includes options on futures as part of its tradable instruments, operating primarily through Tradovate and NinjaTrader.
Here is a comparative look at some of the leading firms that support futures options trading:
| Prop Firm | Options Type | Common Platforms | Typical Profit Split |
|---|---|---|---|
| Topstep | Futures Options | TSTrader, Quantower | 90% |
| Apex Trader Funding | Futures Options | Rithmic-based platforms | 90% |
| TradeDay | Futures Options | Tradovate, NinjaTrader | 80% |
The Search for Stock Options Prop Firms
The search for a modern online prop firm that offers a funded account for stock options is largely fruitless. The traditional prop firms that do engage in stock options trading (like T3 Trading Group or SMB Capital) operate on a different model. They often require licensing (e.g., Series 57), physical presence, and a capital contribution, blurring the lines between a remote-challenge firm and a traditional trading floor environment. For the average retail trader seeking a simple evaluation-to-funding path for stock options, there are currently no mainstream, reputable options available.
A Note on Crypto Options Trading
The world of crypto options presents another frontier. As of now, prop firms have not entered this market in any meaningful way. The volatility, regulatory uncertainty, and nascent infrastructure of the crypto options market make it an unattractive area for the established prop firm business model. Traders interested in this asset class typically need to use their own capital on specialized exchanges.
What Are the Common Rules for Trading Options in a Funded Account?
Gaining access to a funded options account means accepting a new layer of rules designed to protect the firm’s capital. These are more restrictive than what you would encounter in a personal brokerage account.
Platform and Broker Constraints
You will not be trading on your preferred platform, like Thinkorswim or Tastytrade. Prop firms offering futures options dictate the software you must use, which is typically tied to their specific clearing firm and risk management system. Platforms like Tradovate, NinjaTrader, or a firm’s proprietary software are common. This requires traders to adapt to a new interface and execution system, which can have a learning curve.
Limitations on Trading Strategies
The most significant limitation is on strategy. To mitigate risk, firms almost universally prohibit selling naked options. The potential for uncapped losses is a non-starter for their risk models. Most permitted strategies are limited to:
- Buying long calls or puts
- Executing defined-risk spreads, such as vertical spreads (debit or credit) or iron condors
Even with spreads, firms may have rules about the maximum width of the strikes or the assignment risk of holding positions close to expiration. You are responsible for managing any assignments, and failure to do so can result in account termination.
Strict Risk Management Protocols
All standard prop firm risk rules still apply, but they can be more sensitive with options. The maximum daily loss and trailing drawdown are calculated based on the real-time profit and loss of your options positions. The fluctuating value of options due to changes in volatility or time decay can trigger these limits even if the underlying asset hasn’t moved significantly against you. Position sizing rules are also enforced, preventing you from concentrating too much capital in a single trade.
How Do You Choose the Right Options Prop Firm?
If you decide to pursue a funded account for futures options, careful due diligence is essential. Focus on these key areas to find a firm that aligns with your trading style.
Analyzing the Evaluation and Challenge
Scrutinize the evaluation rules. What is the profit target? How realistic is it to achieve that target given the constraints on options trading? Pay close attention to the drawdown rules—is it a static drawdown from your initial balance or a more challenging trailing drawdown? A firm with a more lenient drawdown and a longer time frame to pass the challenge may be better suited for an options trader, whose P&L can be more volatile.
Understanding the Profit Split and Payout Structure
A high profit split, like 80% or 90%, is the industry standard and should be a minimum expectation. However, look beyond the headline number. Investigate the payout schedule. How frequently can you request a withdrawal? Are there minimum profit thresholds before you can get paid? Some firms have complex “scaling plans” that require you to build a profit buffer before you can withdraw your full share, which is a crucial detail to understand upfront.
Assessing Available Instruments and Platforms
Confirm that the firm provides access to the specific futures options you want to trade (e.g., on indices like the S&P 500, commodities like oil, or currencies). More importantly, assess the trading platform. If possible, test a demo of the software the prop firm uses. A clunky, unreliable platform can be a significant barrier to success, especially for options trading, where execution speed and accurate data are paramount.
Are There Alternatives to Prop Firms for Options Traders?
Given the significant limitations, many options traders find the prop firm route to be too restrictive. For those traders, focusing on building their own account and using superior platforms can be a more effective path to success.
Trading with Personal Capital on Specialized Platforms
The primary alternative is to trade your own capital. While this lacks the leverage of a funded account, it offers complete freedom. You can use any broker, any platform, and deploy any strategy you wish, including selling naked options or complex multi-leg spreads, provided you have the appropriate account permissions. Starting with a smaller account and growing it organically allows a trader to develop their strategy without the psychological pressure of a prop firm evaluation and its rigid rules.
The Cointracts Advantage: Mastering Crypto Options with Control
For traders intrigued by the high-growth crypto market, the prop firm world offers no solutions for options. This is where a dedicated platform like Cointracts provides a powerful alternative. Instead of navigating the restrictive rules of a funded program, you can trade crypto options on your own terms. Cointracts is designed for clarity and efficiency, stripping away the unnecessary complexity found on many exchanges.
With real-time market data, a secure integrated wallet, and low fees, Cointracts empowers you to execute your strategies effectively. Whether you are buying calls on Bitcoin in anticipation of a rally or hedging your portfolio with puts on Ethereum, you have full control. Rather than trying to fit your strategy into a prop firm’s narrow box, you can grow your capital using a platform built for the modern options trader. This approach provides the ultimate freedom to innovate and profit in one of the most exciting asset classes available today.
Frequently Asked Questions about Options Prop Trading
Navigating the niche of options prop trading brings up several common questions. Here are clear answers to the most frequent inquiries.
Can you sell options with a prop firm?
Generally, no. You cannot sell naked or uncovered options with a prop firm due to the unlimited risk potential. However, some firms permit selling options as part of a defined-risk spread. For example, you can sell a call option as long as you simultaneously buy a further out-of-the-money call option, creating a credit spread. This caps the maximum potential loss, which is acceptable to the firm’s risk parameters.
Are there prop firms specifically for stock options?
The modern, online challenge-based prop firms that are popular with forex and futures traders do not offer stock options. The few firms that do facilitate professional stock options trading are typically traditional, in-person operations that require regulatory licenses (like the Series 57) and a capital contribution from the trader, making them inaccessible to the vast majority of retail traders.
What is the difference between trading futures vs. stock options in a funded account?
The primary difference lies in the underlying asset. Futures options give you the right to buy or sell a futures contract at a specific price, covering assets like market indices (E-mini S&P 500), commodities (crude oil, gold), and currencies. Stock options relate to individual company shares (like AAPL or TSLA). In a prop firm context, only futures options are typically available. They are often preferred by firms because they are highly liquid, centrally cleared, and their risk is easier to manage on an institutional level compared to the thousands of individual stock options.
