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.
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.
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:
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.
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.
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.
Here are some factors to consider when selecting a platform:
To open an account for options trading in Canada, you’ll need:
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:
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.
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.
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.
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.
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.
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).
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.
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.
Is trading options better than stocks? Many investors trade options for the following reasons:
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.
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.
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
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
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.
There are also other less common styles of options contracts, including:
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.
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:
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.
Options trading has benefits, but it’s not suitable for everyone. Keep in mind these advantages and drawbacks.
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.
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.
We put Questrade and BMO InvestorLine to the test to find the best commission-free trading platform.
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