The broker actually does not impose any restrictions in this case, but there are still some that arise out of tax law. Qualified plans would have to pay 35% UBTI tax on any "debt-financed" profits, and file appropriate returns. Stock margin is considered debt for this purpose. So you would likely not want to sell stocks short or buy any stocks on margin. As others have pointed out, this is the same in an IRA. Another thing is that you should not issue a personal guarantee of the 401(k) account. I was able to get brokers to waive that since it would be improper, but this may depend on a lot of factors including your persuasiveness and the size of the account etc. This should theoretically apply to IRA's also, but is being so widely ignored in the case of IRA's (even IB insists on a personal guarantee) that I do not worry about it for IRA's because the IRS would have to invalidate half the IRA's out there if it were to try to enforce it. But I would not do it for a 401(k). I should add that although I mentioned the name of one 401(k) plan provider, he may be more conservative (I think he is) in his advice than some of what I indicated.
You need to consider that a solo 401k is not protected from creditors in BK whereas an IRA is, and yes I've been through one but your jurisdiction may be different in how much protection an IRA affords. I think some jurisdictions protect only the first million.
Yes , I stand corrected but who can afford to pay 35% tax on effectively unrealized gains? If you cash out enough to pay the tax there is the 10% penalty plus, whatever you take out gets added to your marginal income which yet again obligates one to more taxes. The only way it's not a nightmare is if you are ben bernake and can literally print money at your discretion.
Here are the rules to trade options in 401K and IRA. If you know what is option, you would know the rules without anyone telling you. I have done all of these trades so my post is based on experience. Also some brokers let you do more compared to others. My experience is based on Fidelity and Interactive Brokers. No matter it is 401K or IRA (you can create a brokerage link account in your company sponsored 401K account to do option trades) you can do the following trades: 1- Selling cash covered PUTs. 2- Buying plain vanila PUTS and PUT spread. 3- Buyig plain vanila Calls and Call Spread You cannot : 1- Sell naked Call or any trade that if it goes against you might cause you lose more money than you have in your account.
That is not exactly because you might lose more money than you have in your account. If that were the reason, futures trading would not be allowed in IRA's, and it is allowed. The reason you cannot sell naked calls is that doing so could result in a margin loan, would would result in UBTI tax. Most trustees/brokers are obviously not interested in filing UBTI tax returns so they do not support these transactions. A few independent trustees will allow them. These are not prohibited transactions in an IRA or in a 401(k) and will not result in disqualification of the IRA, though, they just give rise to the tax if you have your own plan that does allow them. See http://financialducksinarow.com/4078/ubti-in-an-ira/
The only 401k I have found that will allow you trade options is Etrade, but they will only give you Level 1 trading permissions (https://us.etrade.com/e/t/invest/options_strategies). A lot of other brokers will allow you to trade other strategies in an IRA. I know from experience that you can trade credit spreads in an IRA margin account at IB.
I am not a laywer, so please do not rely on this as legal advice. Regarding the slightly off-topic question of shorting stock in a trust account, I would like to point out IRS private letter ruling 201434024 of August 22, 2014, pages 5-6 ( http://www.irs.gov/pub/irs-wd/201434024.pdf ), which was about a charitable remainder trust rather than a 401(k): "In Rev. Rul. 95-8, supra, we ruled that a short sale does not create an indebtedness for purposes of § 514 because it constitutes the borrowing of property rather than money. Rev. Rul. 95-8, supra, relies on Deputy v. duPont, 308 U.S. 488, in which the Supreme Court held that a borrowing of property does not give rise to "indebtedness." The taxpayer borrowed stock and argued that payments made to the lender constituted interest. The court held that although the taxpayer had an obligation to the lender, such obligation was not an "indebtedness," because an indebtedness arises only with respect to the borrowing of money, not the borrowing of property. [...] Rulings: 1. The borrowing of stocks by a fund in entering into short positions will not result in "acquisition indebtedness" as defined in§ 514(c) so that none of the distributive share of a fund's income or gain which is derived from the fund's trading activities, to the extent attributable to the foregoing transactions, will be treated as "debt-financed property" as defined in§ 514(b). 2. The purchase of long positions in stocks in accounts at one or more affiliates of a broker using, in whole or in part, cash proceeds from short sales made through a fund's accounts at one or more affiliates of that same broker will not result in "acquisition indebtedness" as defined in § 514(c) so that none of the distributive share of a fund's income or gain which is derived from the fund's trading activities, to the extent attributable to the foregoing transactions, will be treated as "debt-financed property" as defined in§ 514(b). 6 3. The use of long positions in stocks, including some or all of those purchased with short sale proceeds, as collateral to secure the performance by a fund of its obligations to deliver stock to the broker to cover its open short positions will not result in "acquisition indebtedness" as defined in§ 514(c) so that none of the distributive share of a fund's income or gain which is derived from the fund's trading activities, to the extent attributable to the foregoing transactions, will be treated as "debt-financed property" as defined in § 514(b)."
I don't know quite what to make of the following quotation, but I think this excerpt from from Internal Revenue Service publication 598 ("Unrelated Business Taxable Income") at http://www.irs.gov/publications/p598/ch04.html might be relevant to the discussion about UDFI/UBTI tax for trading options in a trust: "Lapse or termination of options. Any gain from the lapse or termination of options to buy or sell securities is excluded from unrelated business taxable income. The exclusion applies only if the option is written in connection with the exempt organization's investment activities. Therefore, this exclusion is not available if the organization is engaged in the trade or business of writing options or the options are held by the organization as inventory or for sale to customers in the ordinary course of a trade or business. Exception. This exclusion does not apply to unrelated debt-financed income, discussed later under Income From Debt-Financed Property."