Best Option Trading Platforms in Canada

Options are the right but not the obligation of engaging in a trade at a specified price by a specified date. This specified price is the strike price, and this specified date is the expiration date. There are many brokerages in Canada offering online trading platforms, each with its pros and cons. Most Canadians look into trading platforms to buy stocks and ETFs. However, some are interested in trading options with higher risk and higher reward, which are in contrast with a more conservative investment choice, like going for dividend stocks. This page specifically compares trading platforms for trading options. We have another page comparing platforms for futures trading.

CIBC Investor's Edge is the online discount brokerage platform the Canadian Imperial Bank of Commerce (CIBC) offers. It allows self-directed investors to manage and trade their investments, such as stocks, bonds, ETFs, mutual funds, and options, at lower commission rates compared to full-service brokers and even compared to discount brokers who are subsidiaries of other Canadian Big Five banks.

Key features include:

• Low Trading Fees: It offers competitive commission rates for stock and ETF trades, making it attractive for cost-conscious investors.
• Investment Tools and Resources: The platform provides research tools, market analysis, and educational resources to help users make informed investment decisions.
• Account Types: CIBC Investor's Edge supports various account types, including registered accounts like RRSPs and TFSAs and non-registered accounts.

Moomoo is an online, low-commission trading platform that allows users to trade stocks, options, and ETFs with advanced tools and real-time data. For Canadian investors, Moomoo provides access to Canadian stocks and ETFs, as well as U.S. stocks, options, and ETFs. Meanwhile, moomoo offers US investors access to U.S. stocks, options, and ETFs, as well as markets in Hong Kong and China A-shares.

Advanced Trading Tools:

Moomoo offers professional-grade charting tools, technical indicators, and in-depth market analysis. Features such as Level 2 market data, which are available for free in certain markets, provide detailed insights into market movements.

Low-Commission Trading:

US stocks can be traded for a penny and Canadian stocks for 1.5 penny, with a minimum per-trade commission of $2 for US stocks and $1.5 for Canadian stocks. These fees are some of the most competitive in the industry.

Currency Exchange Fees:

Moomoo charges 0.09%+US$2 for exchanging USD and CAD, which is a very competitive rate.

Account Types:

Moomoo offers RRSPs and TFSAs, which are specific to Canadian tax regulations. It also offers unregistered cash accounts as well as margin accounts.

Paper Trading:

The platform includes a paper trading feature where users can practice trading in a real-time market environment with virtual money. This can be useful for Canadian investors looking to test their strategies without financial risk.

Educational Resources:

Moomoo provides educational resources such as tutorials, market analysis, and a community forum where investors can share insights. This can be helpful for both beginner and experienced Canadian traders.

Desktop and Mobile App:

The Moomoo platform is available on both desktop and mobile, ensuring that users can access their accounts and make trades on the go, regardless of their location.

Interactive Brokers (IBKR) is a global brokerage firm offering comprehensive trading options services for Canadian residents. Here's an overview of what IBKR provides for Canadian options traders:

Trading Platforms: IBKR offers several platforms suitable for options trading:

• Trader Workstation (TWS): A powerful desktop platform designed for advanced traders, providing access to a wide range of trading tools and analytics.

• Client Portal: A user-friendly web-based platform ideal for managing accounts and executing trades.

• IBKR Mobile: Allows trading on the go with features tailored for options trading, including options spread templates and an exercise tool.

Commissions and Fees: IBKR offers competitive commission rates for options trading:

• U.S. Options: Commissions range from USD 0.15 to 0.65 per contract, depending on monthly trading volume.

• Canadian Options: Commissions are CAD 1.25 per contract, with a minimum of CAD 1.50 per order.

Market Access: IBKR provides access to options markets across North America, Europe, and Asia, enabling Canadian residents to trade options on various exchanges.

Educational Resources: IBKR offers educational materials to help traders enhance their options trading knowledge:

• Traders' Academy: Features courses on options strategies, tools, and market insights suitable for all experience levels.

• Webinars and Articles: Regularly updated content covering various aspects of options trading.

Regulatory Compliance: Interactive Brokers Canada Inc. is a member of the Canadian Investment Regulatory Organization (CIRO) and the Canadian Investor Protection Fund, which ensures compliance with Canadian regulations and provides investor protection.

Account Types: IBKR offers various account types, including individual, joint, and registered accounts (such as RRSPs and TFSAs), catering to the diverse needs of Canadian investors.

Interactive Brokers provides a robust platform with competitive pricing, extensive market access, and valuable educational resources for Canadian residents interested in options trading.

The most common types of options are call options and put options, which are traded on major exchanges like the Chicago Board Options Exchange (CBOE).

1. Call Options

A call option gives the holder the right (but not the obligation) to buy an underlying asset (such as a stock) at a specified price, known as the strike price, within a certain time frame.

Investors buy call options when they expect the underlying asset's price to rise. If the price exceeds the strike price before the option expires, the holder can buy the asset at a discount or sell the option for a profit. The price of a call option is positively correlated with the price of the underlying asset.

2. Put Options:

A put option gives the holder the right (but not the obligation) to sell the underlying asset at a specified strike price within a set period.

Investors buy put options when they expect the underlying asset's price to fall. If the asset's price drops below the strike price, the holder can sell the asset at a higher price or sell the option for a profit. The price of a put option is negatively correlated with the price of the underlying asset. Thus, in some situations, a put option serves the same purpose as shorting the underlying asset.

Both call and put options are typically used for speculation, hedging, or income generation strategies. Stocks that serve as the underlying for options typically need to meet specific requirements set by exchanges like the Chicago Board Options Exchange (CBOE) or the Montreal Exchange (MX) in Canada. These requirements often include:

Market Capitalization: The stock must have a sufficient market cap to ensure liquidity.

Trading Volume: The stock should be traded actively to allow for efficient price discovery.

Commonly, large, well-known companies with high liquidity serve as underlying stocks for options. You can trade options on large Canadian bank stocks, Canadian oil stocks, Canadian insurance stocks, and Canadian asset managers, among others.

There is another way of classifying options.

American Options:

Stock Options: In the U.S. and Canada, stock options are typically American-style. This means they can be exercised at any time before or on the expiration date. These are the most commonly traded options for individual stocks and equity ETFs on exchanges like the Chicago Board Options Exchange (CBOE) and the Montreal Stock Exchange (MX).

Index Options: Some index options in the U.S., like the S&P 100 (OEX) options, are also American-style.

Options on ETFs and Commodities: Most options on exchange-traded funds (ETFs) and commodities traded in North America are American-style.

European Options:

Index Options: Many major index options in North American markets, such as those on the S&P 500 (SPX), are European-style, meaning they can only be exercised at the expiration date. This is because index options often settle in cash, and early exercise isn't as critical for managing the underlying assets.

Currency and Interest Rate Options: Certain options on foreign currencies and interest rates traded in the U.S. or international markets can also be European-style.

REDEFINE YOUR

STOCK TRADING

Trusted By Over 21 Million Users Worldwide

$0 account fee and trade US stocks for up to 90% less

Get access to pre and post-market trading opportunities

Free real time stock quotes and free access to level 2 market data

Advanced charting and research tools

LEARN MORE

REDEFINE YOUR STOCK TRADING

Trusted By Over 21 Million Users Worldwide

$0 account fee and trade US stocks for up to 90% less

Get access to pre and post-market trading opportunities

Free real time stock quotes and free access to level 2 market data

Advanced charting and research tools

LEARN MORE

Options trading offers a variety of attractions that draw both individual and institutional investors due to its flexibility and potential for profit. Some key reasons why traders are attracted to options include:

Leverage:

Small Investment, Big Exposure: Options allow traders to control a large position in a stock or other assets for a fraction of the cost of actually buying the asset. This leverage can magnify profits because a small price movement in the underlying asset can result in a large gain in the option's value.

Limited Risk (for Buyers):

Defined Risk on Option Purchase: The maximum risk is limited to the premium (the price paid for the option). If the market moves against the trader, they will not lose more than this amount, unlike other strategies like futures or margin trading, where losses can exceed the initial investment.

Flexibility:

Multiple Strategies: Options provide a wide range of strategies that can be used depending on a trader’s market outlook, risk tolerance, and objectives. These include bullish, bearish, neutral, or even market volatility-based strategies.

Examples include 1-buying Calls (bullish on the stock rising), 2- Buying Puts (bearish on the stock falling), 3- Spreads and Straddles (strategies that combine multiple options to hedge risk or profit from different market conditions).

Hedging:

Risk Management: Options can be used as a hedge to protect other investments from downside risk. For example, an investor holding stocks can buy put options as "insurance" against a drop in the stock’s price.

Income Generation:

Selling Options for Premium Income: Traders can sell options (i.e., write options) to generate income. This is a popular strategy known as covered calls (when you sell call options against shares you already own) or cash-secured puts (when you sell puts with enough cash to cover the cost of buying the stock if assigned).

Income can be earned by collecting option premiums, providing a steady cash flow, especially in sideways or slightly bullish markets.

Profit from Different Market Conditions:

Profiting in Any Market: Options can be used to profit not only from rising and falling markets but also from sideways markets. Strategies like straddles and strangles are designed to benefit from price volatility, while iron condors and butterflies profit when the price stays within a certain range.

There are two types of accounts you can open with your brokerage. A margin account and a cash account. With a margin account, all your assets in the account are serving as collateral allowing you to borrow money or securities from your broker.

With a cash account, your assets are in the account with your broker in trust. You can buy with your cash and sell what you own. You cannot borrow, and thus, you cannot engage in a short trade. You can register your cash account with the Canada Revenue Agency (CRA) for tax-advantaged investing. This registration is not possible with margin accounts.

Tax-advantaged accounts include Registered Retirement Savings Plans (RRSP) and Tax-Free Savings Accounts (TFSA), amongst other registered accounts.

With options, four basic trades are possible. You can write a call option, purchase a call option, write a put option and purchase a put option. Writing a call option may result in a short position in the underlying while buying a call option may result in a long position in the underlying asset. All four basic trades and, thus, any options trading strategy are permitted in a margin account if you have sufficient margin as determined by your broker.

With a cash account (thus, with all registered accounts), you have significant limitations. Let us look at the limitations imposed by cash accounts (including all registered accounts) on each basic options trade:

Buying call options: You can purchase call options in registered accounts. Purchasing call options can result in exercising them and thus purchasing the underlying. Since you cannot borrow money to purchase them, you need to have adequate cash in your account to exercise the call option.

Selling (writing) call options: In a registered account, you cannot write call options unless you possess the underlying asset. The purchaser might decide to exercise their options, and you should be able to deliver the underlying security. Since you cannot borrow those securities, you need to own them before selling the call options. This is known as the covered call strategy.

Buying Put Options: You can purchase either a protective put or a naked put in a registered account. However, note that the payout from a put option is the ability to sell your security for a specified price. In a cash account, you cannot short sell, so you need to own the underlying security before exercising your put option.

Selling Put Options: Cash accounts do not permit you to write put options.

Before you can trade options in Canada, regulatory requirements mandate that you complete specific forms and disclosures. These are designed to help your broker assess your knowledge of options and ensure that options trading aligns with your financial goals and risk tolerance.

Know-Your-Client (KYC) Requirements: Canadian securities regulators require brokers to collect detailed information about your financial situation, investment experience, objectives, and risk tolerance. This helps ensure that the products and strategies you engage with, such as options, are suitable for your profile.

Options Trading Application: You will need to submit an options trading application, which typically includes questions about:

• Your previous trading experience with options and other securities.
• Your understanding of options strategies, such as covered calls, puts, spreads, and naked options.
• Your intended use of options (e.g., hedging, income generation, or speculation).

Disclosure of Risks: Since options are inherently complex and involve substantial risk, brokers are required to provide you with detailed risk disclosure documents. These documents outline the risks involved, such as market volatility, potential loss of the premium paid, and the possibility of substantial losses for certain strategies (like uncovered options).

Approval Process and Trading Levels: Brokers categorize clients into different options trading levels, depending on their experience, financial situation, and risk appetite. These levels determine the type of options strategies you can engage in, ranging from basic covered calls (low risk) to more advanced strategies like spreads or naked positions (higher risk).

Unlike forex brokers, nearly every online broker provides its own trading platform for clients to trade stocks, ETFs, options, and other securities. These proprietary platforms are designed to enable clients to view market data, analyze trends, and place orders directly within the broker’s ecosystem. Here’s how it typically works:

Integrated Broker Platforms: Most online brokers offer integrated trading platforms for seamless access to their services. These platforms are often proprietary, developed specifically to meet the needs of their clients, and include:

• Trading Tools: Real-time quotes, charting tools, and technical analysis indicators.
• Order Types: A range of order types (market, limit, stop, etc.) tailored to different asset classes, including stocks, ETFs, and options.
• Research and News: Market research, news feeds, and educational resources.
• Mobile Access: Mobile and web versions to ensure accessibility for users on different devices.

Features for Different Asset Classes: Brokers’ platforms may include specialized tools for options trading, such as options chains and analytics. Stock and ETF trading typically include real-time quotes, historical data, and charting tools, while advanced platforms for options often include features like the“Greeks” (Delta, Gamma, etc.) and options-specific order strategies (e.g., spreads and straddles).

Third-Party Platforms: Some brokers allow access to third-party platforms, such as MetaTrader, TradingView, or Interactive Brokers’ API, particularly for users who prefer advanced tools or multi-broker connectivity. These platforms may integrate with the broker's system but are separate from the broker’s own platform, giving users additional flexibility.

Fees and Subscription Levels: Some brokers offer different versions of their platform (e.g., basic vs. advanced), where advanced versions include extra tools or data feeds for a fee. Premium versions may have professional-grade analytics, algorithmic trading capabilities, or direct access to specific markets.

White-Label Solutions: Smaller brokers might use white-label solutions, where they license a platform from a provider (like Apex Clearing) and customize it to fit their brand. This allows them to offer a trading platform without the cost of developing one from scratch.