How to trade options in Canada

Options provide a way out if you get cold feet after agreeing to trade. But convenience comes with a cost.

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Kylie Purcell's headshot

By

Cameron Micallef

&

Kylie Purcell

Edited by

Joelle Grubb

Updated

Fact checked

Key takeaways

  • An option gives you the opportunity, but not the obligation, to buy or sell an asset at a certain price by a certain date.
  • To trade options, open an investment account, create a plan, choose your contract, fund your account and then make a trade.
  • Options trading in Canada is riskier than buying stocks but might boost your investment profits.

What is an option?

An option is a contract between two parties that gives the owner the right, but not the obligation, to buy or sell an underlying asset at an agreed-upon strike price before a specified date.

Options contracts are derivative investments, which means you’re exchanging contracts rather than buying and selling physical assets. The underlying asset attached to the contract, such as stocks or commodities, determines the price.

What is options trading?

Options trading is investing in the future price movement of assets such as stocks, ETFs, mutual funds, currencies, indices and bonds. Options trading reserves a future choice for you to buy or sell an underlying asset at a certain price by a certain date.

You profit based on the difference between the contract’s price the day you enter into it and its future price. If the option is not exercised, it will expire worthless on the expiration date. If the option is exercised, the buyer of the option will either buy or sell the underlying asset at the agreed-upon price.

How to trade options in Canada in 5 easy steps

Options trading in Canada requires a broker, a trading strategy and some form of identification. You may also need to undergo a competency test. Here’s how to trade options in Canada in five steps:

  1. Find an options trading platformCompare investment platforms that offer options trading. Look at fees, features and customer support.
  2. Create an investment planIdentify your investment objectives, and develop a plan for achieving your financial goals while taking into account your risk tolerance.
  3. Select your options contractOnce you’ve found an asset you want to trade, choose the terms of your contract, including the expiration date, strike price and option type (call or put option).
  4. Fund your accountDeposit money into your investment account. Transfer methods may include bank transfers, wire transfers or debit cards. A minimum transfer amount may apply.
  5. Place your tradeExecute your trade to buy or sell shares. A market order lets you trade at the current market price, while a limit order lets you set the maximum you’ll pay or the minimum you’ll receive.

1. Find a platform that offers options trading in Canada

Sign up with a brokerage that offers options trading in Canada. Options listed on overseas markets, such as the United States, are possible to trade from Canada, depending on the platform you use.

Compare options trading platforms in Canada

When looking for the best options trading platform in Canada, pay attention to fees, research tools and news, which will help you stay on top of market events and find profitable opportunities. Support for limit orders is helpful too, as it lets you have some control over your trading outcomes.

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Finder Score for stock trading platforms

To make comparing even easier we came up with the Finder Score. Trading costs, account fees and features across 10+ stock trading platforms and apps are all weighted and scaled to produce a score out of 10. The higher the score, the better the platform—it's that simple.

Read the full methodology

How do I compare options trading platforms?

Here are some factors to consider when selecting a platform:

  1. Fees: Find an options broker that offers low commissions and contract fees.
  2. Markets: Ensure that the platform has access to the markets you’re interested in trading. For instance, some brokers offer US stock options and others feature options listed in other overseas markets.
  3. Assets: Make sure the platform offers the assets you want to trade options with, such as stocks, indexes, commodities, futures and ETFs.
  4. Educational Resources: Look for a platform that provides educational resources, such as webinars and articles, to improve your trading skills.
  5. Security: Check that the platform is authorized by your local regulator, has a solid track record and has robust security measures in place to protect your personal and financial information.
  6. Customer Support: Choose a platform with responsive customer support that can assist you with any trading-related issues.
  7. User Interface: Choose a platform with an intuitive and user-friendly interface to save time and prevent confusion when trading options.
Information you’ll need to open an options trading account

To open an account for options trading in Canada, you’ll need:

  • Be a Canadian resident and at least the age of majority in your province/territory (18 or 19 years old).
  • Have basic information with you. The broker will usually ask you to prove who you are before signing up.
  • Be able to pass an options trading assessment. Before you can trade options, you’ll need to show the broker you have some understanding of how they work.

2. Create an investment plan

To trade options successfully, it’s crucial to have clear investment objectives and a plan. Knowing your end goal will help inform your options trading strategy. The following questions will help to inform your trading plan:

  1. What options do I want to trade?
  2. How much do I want to trade?
  3. What options trading strategies should I use?
  4. What’s my risk tolerance? How much can I afford to lose?
  5. What’s my entry and exit strategy?
  6. What’s my overall investment objective?

Despite the potential for large returns, statistically speaking, trading options is more likely to result in losses. Given the risk, options may not be suitable for conservative investors.

What should I research?

A good place to start in researching stock options is company fundamentals and financial information, volatility levels, upcoming events and company announcements. Besides company-related updates, you’ll also need to stay on top of business news and macro conditions. Both will have an impact on the future prices of stocks.

3. Select your options contract

Once you’ve decided which company stock or other asset you want to trade (this is called the underlying asset), you need to select a contract.

For every contract, you’ll need to choose the expiration date, strike price and option type (you can buy or sell a call option or a put option). Generally, if you think an asset’s price will rise, you should buy a call option or sell a put. Alternatively, if you predict the price will fall, you should buy a put option (also called shorting) or sell a call option.

A call option gives you the right (but not the obligation) to buy the underlying security at the strike price, while a put option gives you the right to sell the underlying security at the strike price.

Key terms for option trading
  • Call option: Gives you the right, but not the obligation, to buy an asset at a specific price by a certain date.
  • Put option: Gives you the right, but not the obligation, to sell an asset at a specific price by a certain date.
  • Strike price: Predetermined price at which an option can be exercised.
  • Spot price (market price): Current buying or selling price of an asset.
  • Options spread: A single transaction involving the execution of multiple contracts with different strike prices.
  • Exercise. Using the option to buy or sell an underlying asset.
  • Expiration date. Deadline for exercising an option, after which the option becomes worthless or is exercised by the holder (the underlying asset is bought or sold).
  • Premium. Price paid for an option contract.
  • At-the-money. When an option’s strike price equals the current market price of the underlying asset.
  • In-the-money. When an underlying asset’s market price exceeds the call option’s strike price or is below the strike price of a put.
  • Out-of-the-money. When an underlying asset’s market price is below the call option’s strike price or is above the put’s strike price.

4. Fund your account

Before placing your trade, you’ll need to top up your account with funds. Typically, there are a few ways to fund your account, including bank transfer, wire transfer or debit card.

There may be a minimum amount required when trading options, which will vary from broker to broker, but you’ll generally need to start with at least US$1,000.

If you’re using leverage, keep in mind that you’ll need enough funds to cover potential losses, which may be greater than your initial trade amount.

5. Place your trade

After you’ve chosen your contract and funded your account, it’s time to execute your buy or sell trade.

A limit order lets you set the maximum price you’re willing to pay (if buying) or the minimum price you’re willing to receive (if selling). A market order will execute at the current market price, which may result in paying a higher premium than you initially intended due to the bid-ask spread.

Decide the premium

The premium is the price you’re willing to pay to buy the contract or the price you’ll accept if you’re selling. It’s influenced by factors like the current market price of the asset, implied volatility, the expiration date and the premium currently offered on the market for the contract.

This is set by the bid-ask spread, or the difference between the highest price a buyer is willing to pay for the option (the bid price) and the lowest price a seller is willing to accept (the ask price).

Choose the time frame

When trading options, a shorter time frame is better because the closer an option gets to its expiry date, the less it’s worth. As such, you’re looking for sharp movements of the underlying asset in a short period.

When do options expire? US and Canadian options contracts usually expire on the third Friday of the month, but there may be weekly or monthly expiration dates available for some contracts.

Options trading example

If a trader buys a call option on a stock with a strike price of $50 and the stock price rises to $60, the trader can exercise the option and buy the stock at $50, then sell it at the market price of $60, realizing a profit of $10 per stock.

Options vs stocks

Is trading options better than stocks? Many investors trade options for the following reasons:

  • Options can amplify profits using leverage
  • They can protect stocks from loss
  • They can provide extra income from stocks
  • They allow you to speculate/make money in a falling market
  • They can be a lower-cost way to invest
  • They allow investors to have more flexible or complex strategies

On the downside, option trading is usually much riskier than directly buying or selling stocks. While buying stocks is a relatively simple process, options trading can be complicated and has a greater chance of miscalculation, leading to loss.

Options traders also typically use leverage, which means they can enter a large trade with a small amount of initial capital. While this can amplify profits, it will also amplify losses if the trade goes against the trader.

While investing in the stock market directly is suitable for investors of any level of experience, options trading is best suited to more experienced traders.

Types of options

There are two types of options. A call option gives its buyer the choice to purchase stocks from its writer at a specific price (the “strike price”) before a set time (the “expiry date”). A put option is the opposite, where the buyer contracts to sell the stocks to the writer at a set price within a specific time.

The buyer of a call option hopes the underlying stocks will rise in price, while the put option buyer bets the price will fall. The writers of the contract are hoping for the opposite.

Call options

Buying call options gives you the right to buy an asset at a predetermined price within a specific time frame. Selling call options obligates you to sell your assets to the buyer of the option if they exercise their option.

Day traders often use call options to control multiple stocks with a low amount of money.

Options trading example: Call options

  1. Company X stocks currently trade at $100 per stock. That’s expensive for you, but you believe the stock price will move higher and you can turn a profit.
  2. You buy 1 call option, which is the right to buy 100 stocks of the company at an agreed-upon price $100 per stock). To buy this options contract, you pay a premium of $500 ($5 x 100 stocks). With a $500 investment, you control 100 stocks worth $10,000.
  3. A week later, the stock price climbs to $120 per stock. To exercise the option, you would need to have $10,000 in your account to buy the 100 stocks at the agreed-upon price of $100 each.
  4. Instead of buying the stocks, you sell the options contract to another trader for a higher price than what you paid and pocket the difference between the premium you paid for the option and the price for which you sold it on the market.

Put options

Buying put options gives you the right to sell an asset at a predetermined price within a specific time frame. These are the opposite of call options.

Put options are often used to insure your investment.

Options trading example: Put options

  1. Suppose you buy 100 stocks of Company X at $100 per stock. That’s $10,000 invested. You believe the stock price will continue higher, but there’s economic news that may negatively affect your stock price.
  2. To protect your investment, you buy a put option contract for $500. That’s 100 stocks x $5 premium per stock, an arbitrary number as the premium varies depending on multiple factors.
  3. One put option contract gives you the right to sell 100 stocks at an agreed-upon price until a specific date. In this case, let’s say the agreed-upon price is $100 per stock and the expiration date is 30 days later.
  4. The stock price starts to drop. By the time the contract reaches the expiry date, Company X stocks are worth $70 apiece. Without the options contract, you could have lost $3,000 (100 stocks x $30).
  5. Luckily, you bought the put option and decided to exercise it. You sell your 100 stocks for $100 each—the agreed-upon price in the contract—instead of the market price of $70.
  6. In this scenario, you’re $500 down for the premium you paid to buy the options contract instead of $3,000. Much better.

American vs European options

There are two main styles of options contracts: American-style and European-style options. While American-style options are more common around the world, both types of contracts tend to exist in any one market.

  • American-style options: American-style options can be exercised by the buyer at any time prior to the expiration date. This gives the buyer more flexibility in terms of when they can choose to exercise their option.
  • European-style options: European-style options can only be exercised by the buyer on the expiration date. This means the buyer has less flexibility in terms of when they can choose to exercise their option.

There are also other less common styles of options contracts, including:

  • Bermuda-style options: Bermuda-style options can be exercised at certain specified dates prior to the expiration date. This gives the buyer some flexibility in terms of when they can choose to exercise their option.
  • Asian-style options: Asian-style options are settled based on the average price of the underlying asset over a specified period rather than the price at the expiration date.

It’s important to understand the different styles of option contracts because the style can impact the price and the timing of when the option can be exercised, which can affect the potential profitability of the trade.

How much does options trading cost?

Options trading in Canada comes with a number of different fees, depending on what you trade and where you trade. Keep an eye out for:

  • Broker commissions: These are basically paying for a trade to be executed or for any investment advice. Depending on the broker, sometimes these fees are waived.
  • Contract fee: Charged by brokers when an options contract is exercised or assigned. This fee is typically charged per contract and can vary depending on the broker and the exchange where the option is traded.
  • Platform fees: You can be charged numerous fees for using the trading platform.
  • Pass-through fees: These include options regulatory fees, SEC membership fees, FINRA trading activity fees and OCC clearing fees.
  • Exchange fees: These fees are usually charged when you trade using a foreign currency. You will pay a small percentage to transfer into and out of the foreign currency.

Many of these fees are a fraction of a cent, but given that you will be charged them, it is best to take note of what you’re paying to the broker.

Advantages and risks of options trading in Canada

Options trading has benefits, but it’s not suitable for everyone. Keep in mind these advantages and drawbacks.

Pros

  • Leverage. With a relatively small upfront investment, it's possible to amplify your returns.
  • Flexibility. Choose from a broad range of strategies for bullish, bearish and flat markets.
  • Income generation. Strategies like covered calls can generate income from assets you already hold (although no strategy is risk-free).
  • Hedging. Puts can offset losses elsewhere in your portfolio, acting as a type of safeguard.
  • Limited downside for buyers. When buying options, your loss is typically limited to the premium you paid.

Cons

  • Market volatility. Options trading can be particularly risky in volatile markets, where sudden price movements can lead to significant losses or gains. Even if the underlying asset moves in the direction predicted, volatility can result in the option expiring out of the money, which means it loses its value.
  • It's hard to get the price right at the exact time. With options trading, you're not only betting on the stock price—you're betting on the stock price at a specific time. You may be right that the stock price will rise or fall, but being correct about when is hard.
  • The premium is non-refundable. When you buy an options contract, the premium you pay goes to the seller of that contract. That's how you pay the other side to take your risk. Whether you're right about the stock price or not, the premium you pay is non-refundable.
  • You'll likely pay a fee. Most brokers charge fees for options trading. This fee is typically less than $1.50 per contract. You may also pay up to $19 for an options exercise fee.
  • Leverage. Options trading involves leverage, which means that traders can control a large amount of the underlying asset for a relatively small upfront investment. While leverage can amplify profits, it can also amplify losses.
  • Complexity. Options trading can be complex. Traders need to understand the various strategies and trading techniques to be successful. A lack of understanding can lead to mistakes and losses.

Canadians gravitate to stocks more than any other type of investment

If you’re looking to grow your money through stock investing, you’re not alone. According to the Finder: Consumer Sentiment Survey March 2026, 39% of Canadians consider stocks to be the most appealing type of investment in 2026, followed by mutual funds (36%), GICs (34%) and ETFs (26%).

Crypto-related assets were rated the lowest, which may suggest that Canadians prefer established assets with a history of generating returns over newer, more speculative investments.

What do you think are the most appealing types of investments to make in the next 12 months?

What do you think are the most appealing types of investments to make in the next 12 months?
SelectionResponse
Stocks39.01%
Mutual Funds35.65%
GICs34.38%
ETFs25.92%
Bonds18.30%
Money Market Funds16.46%
Cryptocurrency14.98%
Cryptocurrency ETFs9.29%
Cryptocurrency Meme Coins5.60%
Source: Data from the Finder: Consumer Sentiment Survey March 2026 by Pollfish of 1,001 Canadians.

Bottom line

Options trading in Canada comes with rewards and opportunities, but it’s also risky and can be difficult for new investors to grasp. While options trading gives you the right, but not the obligation, to own an underlying asset, you are trading with leverage, which should be left for sophisticated investors.

  • Options trading is the process of buying and selling options contracts.
  • Option trading gives the buyer the right—but not the obligation—to buy or sell an asset.
  • You can compare online brokers to begin options trading.

Stock trading in Canada

FAQs

Sources

To make sure you get accurate and helpful information, this guide has been edited by Joelle Grubb as part of our fact-checking process.
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Investments writer
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Cameron Micallef was an investments writer for Finder. He has previously worked on titles including Smart Property Investment, nestegg and Investor Daily, reporting across superannuation, property and investments. Cameron has a Bachelor of Communication and Media Studies/ Commerce from the University of Wollongong. Outside of work Cameron is passionate about all things sports and travel. See full bio

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Senior investments editor

Kylie Purcell is the senior investments editor at Finder. She has a background in business and finance news with previous roles at SBS, Your Money, TVNZ, Switzer Group and The Adviser magazine. Kylie has a Masters in International Journalism and a Graduate Diploma in Economics. When she's not writing about the markets you can find her bingeing on coffee. See full bio

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