I guess it all depends on the objective of the competition
If the competition is just for clean fun, to see who can make the most amount of money of 3 months, then i guess you can allow the play of options.
However, if the competition is in the name of promoting education in trading stocks, I guess options should be banned, because new players pick up bad habits, like "betting the farm". And since this is a competition, traders may not draw the line on whether they are overdoing it. Although experienced traders will know that they shouldn't be placing too much risk into a trade, new players may not have the same mentality. As the competition is only over a span of 3 months, sometimes, it may simply be a question of "who's riding the trend with the most amount of leverage" However, if the trend reverses, or goes sideways, can such methods still hold? We do not know. Thus, it is also important for candidates to know that their results in the competition may not translate into success in the real world, as the rules for 3 months, may not apply for a lifetime
This is the sad fact about the competitions, making the trade-off between what is fun, and what is effective
If you want to know who is truely good at trading stocks, i guess it is not fair to judge how well they fared over 3 months, but rather, how good their system is, in making them money over the long haul.
In my opinion, it is ok to have both kinds of competition. There's nothing like clean fun to keep your fiery passion for trading stocks burning. On the other hand, there may be the serious traders who prefer to pit their systems against each other. However, know the objectives of your competitions, and vary your rules(timespan, diversification, options...) according to your purpose, and I believe, everyone will have a good time
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