Can You Trade Options on a Funded Account?

Discover whether you can trade options on a funded trading account. Learn the rules, risks, and broker requirements before you start, plus tips to maximise profits.

Open Account

Table of Contents

Funded trading accounts have emerged as a popular alternative to traders who want to trade with more capital without putting their own money at risk. One of the most frequently asked questions by potential options traders is whether options trading is allowed in such accounts. Beirman Capital, which offers access to CFDs in forex, stocks, indices, commodities, and cryptocurrencies through the MT5 platform, is frequently viewed by traders who are interested in this direction. This paper explores the possibility of trading options on a funded account, outlining the rules, limitations, and best practices.

What Is a Funded Trading Account?

A funded trading account is a scheme provided by proprietary trading firms, also known as prop firms, which provides traders with access to the capital of the firm. This implies that traders are able to trade in the markets without investing their funds. Traders are typically put on a probationary period during which they are required to meet certain profitability levels, drawdown levels, and show steady risk management.

After passing the evaluation, the trader is provided with a live funded account using the capital of the firm. The trader and the firm share profits, usually in a profit split agreement that may be as low as 50 per cent and as high as 90 per cent in favour of the trader.

The popularity of funded accounts is that they reduce personal financial risk and enable traders to trade larger positions. These accounts may include a wide range of markets, including forex, futures, stocks and in certain instances, options.

There are, however, strict rules that accompany trading a funded account. The account may be lost due to violation of daily loss limits, holding a position after the allowed hours, or using unauthorised strategies. Concisely, a funded trading account is a chance to get more capital to trade with, and it is up to the trader to be disciplined, consistent, and adhere to the rules of the firm.

Can You Trade Options on a Funded Account?

The question that is most frequently asked by traders is: Can you trade options on a funded account? It is not a yes or no answer, but it is all dependent on the prop firm and their trading rules.

Most funded trading programs are forex, futures, or CFD-based and do not permit options trading due to the increased margin requirements, overnight risks, and complexity of option position management. Nevertheless, there are firms that permit trading of funded account options, particularly when the strategies are of defined risk, e.g. covered calls, cash-secured puts, debit spreads, or credit spreads.

Prop firms which allow options trading tend to have stringent rules to safeguard their capital. These can be:

  • Limiting the type of strategies (no naked calls or puts)
  • Restricting overnight positions in high-volatility events
  • Reducing leverage on options trading
  • Ensuring that trades can only be done through licensed brokers or platforms

This can be a game-changer for traders. The availability of additional capital implies the possibility of making bigger positions and possibly earning more profits, with a smaller personal risk. However, it also implies that strict adherence to the rules may lead to the immediate loss of the funded account.

When you are specifically seeking the best prop firms to trade options, the first thing you should do is to read the rulebook of each firm and make sure that options are covered. Options trading on a funded account can be a very effective method of steady growth with the right firm and the right strategy.

Can You Trade Options with a Prop Firm?

The question that many traders who pass a funded trading account ask themselves is: Can I trade options with a prop firm? This will depend on the funded account provider you select. Other companies offer trading in funded account options, whereas others specialise in forex, futures, or CFDs.

Risk management is the primary reason why many prop firms do not use options. These options can include higher margin requirements, unpredictable price changes, and overnight exposure to market events. As an example, a sudden news update or earnings announcement can lead to sudden changes in the value of an option.

With that said, options traders have prop firms that permit some low-risk or defined-risk strategies. The generally accepted methods are:

  • Covered calls
  • Cash-secured puts
  • Debit spreads
  • Credit spreads

These measures reduce the possible losses and assist firms to safeguard their capital. The sale of naked calls or puts are generally not allowed as high-risk strategies.

To trade options on a funded account, you should first read the rulebook of the firm. Inquire about the accepted markets, position sizing and profit targets. Also, see whether they permit overnight holding or intraday trading only.

The most appropriate way is to select a prop firm that suits your trading style. A funded account with the right firm can provide you with access to more capital, more opportunities, and less personal risk-all without having to give up your favorite options strategies.

How Funded Firms View Options Trading Risks

Trading firms that fund traders give them their capital and therefore their main concern is to safeguard that money. In the case of options trading, most companies are conservative since options are risky and may be difficult to manage as opposed to other markets such as forex or futures.

Volatility is one of the major concerns. Options may gain or lose a lot of value within a few minutes, particularly when earnings are announced, economic data is released, or when there is some unexpected news in the market. This fast price action may cause huge losses when positions are not well managed.

Overnight exposure is another problem. When a trader is in an option position at the end of the day, unexpected news may result in a large price gap the following day. In the case of prop firms, this may imply exceeding the permitted daily drawdown limit in a single trade.

Leverage and margin requirements also play a role. Some option strategies, such as selling naked calls or puts, are too risky to be used in most funded accounts because they have unlimited risk and need a large margin.

Due to these risks, most firms that permit prop firm options trading restrict traders to defined-risk strategies like spreads, covered calls, or cash-secured puts. These techniques limit the possible losses and safeguard the capital of the firm.

Briefly, when it comes to trading options on a funded account, be prepared to be subjected to strict rules. Companies would rather engage in steady, low-risk trading than high-reward, unpredictable trading.

Types of Options Strategies That May Be Allowed

Can You Trade Options on a Funded Account? 

Not every strategy is permitted on all prop firms that provide funded account options trading. The majority of them favor the approaches that have a specific risk and exposure. These are some of the most popular strategies that pass the rules.

Covered Calls

A covered call is a situation where you are long the underlying stock or asset and sell a call option on it. This is deemed as low risk since the position is already secured by your asset. This is viewed by many funded account providers as a safer method of earning income on current holdings.

Cash-Secured Puts

A cash-secured put is the sale of a put option with sufficient cash in your account to purchase the asset should you be assigned. This allows the trader to fulfill the obligation without additional leverage, and is a common option in low-risk options strategies funded accounts.

Debit Spreads

A debit spread involves two option contracts to reduce risk. You purchase one option and sell another with a different strike price. This limits profit and loss, which is in line with most prop firm options trading regulations.

Credit Spreads

Like debit spreads, credit spreads receive premium at the outset and reduce risk through an offsetting option. This strategy is approved by many firms since losses are predetermined.

Companies do not usually engage in risky actions such as selling naked calls or puts. By following these approved options strategies on funded accounts, you will be able to trade with confidence and remain within the rules.

How to Find a Funded Account That Allows Options Trading

To trade options using a funded account, begin by researching the top prop firms to trade options. Look at their official rules to make sure that options are permitted and what strategies are acceptable. Most companies allow only low-risk options such as covered calls, cash-secured puts, debit spreads, or credit spreads.

Pay attention to such details as overnight holding, maximum drawdown, and broker restrictions. These may have a direct effect on your trading style and profitability.

Trader reviews will enable you to know how strict a firm is, how they process payouts, and whether their platform will suit your needs.

Selecting the appropriate funded account to trade options is a matter of balancing flexibility, risk management, and profit potential-so you can grow your trading without putting your own money at risk.

Pros and Cons of Trading Options on a Funded Account

Pros:

  • More capital accessibility- Trade larger positions without putting up your own money.
  • Reduced individual risk- Losses are not on your savings but on the capital of the firm.
  • Profit potential – Profit share, usually 80-90%.
  • Scaling opportunity- Some companies scale your capital as you demonstrate consistency.

Cons:

  • Hard rules – Breaking position limits, strategy restrictions, or drawdown rules can get you the account.
  • Restricted options – Most companies only permit low-risk options such as covered calls or spreads.
  • Profit share- You retain a percentage of profits.
  • Testing issues- The first test is not easy to pass, it takes discipline and skill.

Options trading on a funded account can be profitable when you play by the rules and trade within approved strategies, but not when you are a reckless or high-risk trader.

Conclusion

It is possible to trade options on a funded account, but this is subject to the rules and risk policies of the prop firm. Whereas most companies specialize in forex or futures, others such as Beirman Capital provide opportunities with tight, low-risk strategies to preserve capital. To be successful, one needs discipline, regular performance, and adherence to all trading rules. In case you are interested in trying funded account options trading with a trusted partner, Beirman Capital can help you find the right direction. To find out more about our programs and begin your path to professional trading success, contact us today.

FAQs

1. Do prop firms allow you to trade options?

In certain prop firms, options trading is allowed, though usually only low-risk options like covered calls or spreads. Others limit choices to conserve capital and handle risk.

2. What are the disadvantages of funded accounts?

Funded accounts are highly regulated, restricted in trading strategies, and profit sharing. The successful evaluation can be followed by the loss of the account in case of violation of drawdown or position limits.

3. What kind of account do I need to trade options?

You must have a margin-approved brokerage account that is approved to trade options to trade options. The level of approval is based on your experience, type of strategy, and risk requirements of the broker.

4. What is a funded options trading account?

A prop firm offers a funded options trading account, where you can trade options using the capital of the firm after passing an evaluation, and share profits according to established rules.

5. How do I choose the right funded options trading account?

Select a funded options trading account by verifying whether the company permits your strategies, provides reasonable profit sharing, transparent rules, good support, and a platform that fits your trading style.