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Unlock the Potential: 9 Best Canadian Brokers for Options

This piece provides recommendations for the best Canadian broker for options to help you get started.

It can be difficult to choose between brokerage platforms because of the differences in their basic features, such as trading commissions, types of orders, research tools, market information, and customer support.

Particularly if you are fresh to options investing, you should make sure the site is user-friendly for options trading.

Make sure it supports the sophisticated tactics you want to use, advanced traders.

1. What are the Options?

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Investors use options, a type of derivative financial product, to speculate and protect against the volatility of stocks or other assets. Options trades are facilitated by option contracts, which give the bearer the right but not the obligation to buy or sell a commodity at a specified price within a specified time period.

The call, as well as put options, are the two different categories of options. While a put option is lucrative if the asset’s value decreases, a call option enables a trader to profit when the asset’s price rises. Investors also have the choice of selling calls or putting contracts on other traders. If the asset’s worth drops, selling a call choice is profitable, and the opposite is also true.

Options may be used to produce income, hedge against risk, or speculate on the movement of a market. Various underlying commodities, including currencies, stocks, indices, and various other financial instruments, are available for trading as options. They can be sold over the counter as well as through online brokerages. (OTC). Options trading entails considerable risk, making it inappropriate for all traders and buyers. Before you place a transaction, you must comprehend the workings of options, the risks involved, as well as how to use the trading tools.

1.1 Benefits of Option Trading

Leverage: Because options allow you to use tiny investments to control larger positions, you can profit significantly from price swings without putting up a substantial sum of money upfront.

Limited risk: Since options allow for the use of leverage, the amount you risk when trading is the premium given for an option contract. In contrast to other financial products, like futures, you run the risk of losing more cash than you put up.

Flexibility: Options may be employed in a variety of methods, such as risk hedging, income generation, or market direction speculation. Because of this, options are a flexible instrument for risk management or seizing market opportunities.

1.2 Drawbacks of Option Trading

Loss of premium: There are some risks involved in trading financial instruments. Even though options carry comparatively lesser risks, you still run the risk of losing the premium if the asset that underlies them deviates from expectations.

Limited profit possibilities: The asset market can only rise or fall to the strike amount of the call choice or the put price, respectively, so there is a limit to how much money you may earn from options. This implies that the possibility of making money in trading is restricted, as opposed to the unlimited profit potential in financial instruments such as futures.

2. What is a Platform for Trading Options?

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An internet brokerage runs a platform for trading options. With the exception of trading options, it is comparable to a stock dealing platform. Online brokers provide both normal options traders and active traders that might engage in day trading with a variety of trading instruments. According to the trading site you use or the value of your assets, some brokers may provide higher degrees of customer support. Some may also provide reduced commissions for both stock trades as well as option trades as well as free stock trading. To get started, you must first establish an account.

3. How Do Options Function?

Typically, the cost of an option contract is expressed as 100 shares and pieces of the underlying commodity.

3.1 Call Options

Assume that the stock of your preferred company (stock A) is presently trading at $70 per share while you anticipate a price increase in the near future.

You choose to pay $5 per share to purchase one “call option” with an expiration date of $70. The option deal costs $500 ($5 multiplied by 100 shares) because it covers 100 shares. (i.e. the premium).

Before the contract’s end, stock A’s price increases to $85 as a result of your winning wager. You utilize your right to purchase 100 shares of Stock A at $70 by purchasing them at a lower price and then selling them for $85 each.

Theoretically, you would earn $10 per share (200% return) (i.e., $15 minus the $5 initial premium you spent).

You only turn a profit in this situation if the stock price rises above $75.

Your losses are capped at the $500 premium in the event that the stock’s price drops or remains static until expiry.

3.2 Put Option

If you think the company’s equity is about to fall, you may additionally play this in reverse by purchasing a “put option.”

Assume you invest $500 on a single put option alongside a strike cost of $70.

You can execute your option to sell one hundred shares of Stock A at $70 if the price drops to $55 on or before the expiration date by purchasing it at $55 and then selling each share for $70. This results in a surplus of $1,000 ($1,500 less the $500 premium).

Your cost of breakeven is $65.

4. Best Canadian Broker for Options

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In search of the top options brokerage? We think that these six brokerages provide the top options trading tools.

4.1 Questrade

The four tools used by Questrade to conduct trading are Questrade Trading (also known as a desktop platform), the Questrade app, Questrade IQ Edge, as well as Questrade Global. Because they are simpler, beginners should definitely stick with Questrade Trading and the app.

On the website, trading is very simple. The Questrade app, however, doesn’t have the greatest ratings. On the App Store as well as Google Play, it has 1.9 and 2.3 ratings, respectively, out of a possible 5 stars. The program has received complaints from users for being glitchy, sluggish, or stopping on them.

However, to be eligible for active trader rates, you must purchase an advanced data package, which costs $89.95 per month. On American exchanges, trading fees are the same price but are paid in dollars.

Before you may make any trades, your account must have a minimum of $1,000 in it if you want to sell options or stocks. This might discourage some novice buyers. However, obtaining a practice account is a possibility.

4.2 Investor’s Edge by CIBC

There are only two trading tools available for CIBC Investor’s Edge: the website as well as the CIBC Mobile Wealth application. Advanced trading systems don’t exist.

The website is simple to use, and the app’s ratings are about ordinary. On the app stores as well as Google Play, it has 3.3 and 3.5 ratings, respectively, out of a possible 5 stars. Additionally, the program is available to users who have accounts with Wood Gundy, Imperial Investor Services, or Private Investment Counsel.

There is no minimum balance requirement to start trading, and CIBC offers straightforward guidance on how to trade options.

4.3 Interactive Brokers in Canada

There are three trading tools offered by Interactive Brokers: Trader Workstation, Client Portal, and IBKR Mobile. (its app). Use the Interactive Brokers Client Portal or the mobile application if you’re a beginner.

Making a transaction on the site is simple, as well as the website is simple to use. With 3.9 out of 5 stars in the App Store as well as 3.4 out of 5 stars in Google Play, the app has received generally positive evaluations.

In comparison to its rivals, commissions are quite cheap. For orders with fewer than 10,000 trades per month, they commence at $1.25 per contract with a $1.50 minimum charge per order. The fee is $1.15 per contract for trades between 10,000 and 50,000 per month, $1.05 per contract for trades between 50,001 and 100,000 per month, as well as $1 per contract for trades over 100,000 per month. There is, however, a $1.50 minimum charge.

4.4 Qtrade

Qtrade has two selling platforms: its website as well as the mobile app, which should not be confused with Questrade. It does not provide a sophisticated trading tool.

The website is simple to use, and trading is simple. The program has received below-average ratings (2.4 out of 5) on both Google Play and the program Store, though. Some reviewers complain that the mobile application is sluggish, has a confusing layout, and has login issues.

A trading fee of $8.75 + $1.25 per contract is due from average investors. People who trade at least 150 times per quarter or have assets worth at least $500,000 pay $6.95 for each trade + $1.25 for each contract. Trade commissions on American exchanges are expressed in U.S. money.

There is no minimum investment quantity needed, and you can open a practice account.

4.5 Scotia iTrade

The Scotia OnLine, Scotia iTrade Trading Desk, Scotia iTrade FlightDesk, as well as the Scotia iTrade mobile app, are the four trading tools offered by Scotia iTrade. For novices, Scotia OnLine as well as the app work best.

Making a transaction is simple and the website is simple to use. Even though the mobile application is just for trading, the evaluations aren’t great. It has 1.6 and 1.4 reviews on Google Play as well as the App Store, respectively. Users have reported that the app has been slow or prone to crashing and that they are unable to log in.

Options trades are subject to a regular commission of $9.99 per exchange plus $1.25 per contract. The commission for traders who execute 150 or greater trades each quarter is $4.99 per trade + $1.25 per contract. The commissions are identical but are paid in U.S. dollars for transactions made on American exchanges.

There is no minimum investment requirement, and iTrade U offers a number of tools for learning about investing. Not even an account is required. But you can open a practice account if you desire to exchange for free.

4.6 TD Direct Investing

Options trading is available on four distinct platforms through TD Direct Investing: WebBroker (the main website), the TD application, Advanced The Dashboard, as well as thinkorswim. The simplest way to get started for novices is probably with WebBroker and the app. The thinkorswim platform is only for dealing with American options.

Trading is straightforward thanks to the website’s ease of use. The app serves banking and trading, and the App Store and Google Play have received generally positive evaluations (4.5 of 5 stars). (4.3 out of 5 stars). It’s difficult to determine how many positive reviews have specifically for the app’s trading features because it has other uses besides trading.

For trading in options, the standard commission is $9.99 per trade + $1.25 for each contract. Active investors pay $7 per trade + $1.25 per contract (150 or more trades per quarter). The only difference in commissions for transactions executed on American exchanges is that they are paid in U.S. dollars.

No minimum is required to contribute. Even if you’re not a client, you can still access free financial education materials like live and recorded webinars.

4.7 National Bank Direct Brokerage

Another large bank-backed options trading tool, National Bank Direct Brokerage is supported by the National Bank of Canada this time.

In under fifteen minutes, you can open an account and begin saving. You can also use the wealth of available tools to make investing easier.

Some of the best features include the OptionsPlay analysis platform, which offers market forecasts and allows you to compare up to three different approaches side by side, and Market-Q, a unified tool that shows current information so you can profit from price changes. To keep note of your favourite stocks, you can make watchlists.

It has extremely low commissions, with a minimum of $6.50 for each trade and beginning at $0 for each trade plus $1.25 per contract.

The maximum fee for purchases under $2,000 is $19.95.

4.8 RBC Direct Investing

The internet broker RBC Direct Investing is up next. It provides free actual time quotes on your assets as well as Level 2 quotes for securities and exchange-traded and is supported by the Royal Bank of Canada. In order to receive notifications and market commentary, you can also build up watchlists.

It provides a variety of platforms for every sort of investor, similar to TD Direct Investing.

RBC Direct offers call, put, covered call, and naked put options for investing. You can practice investing before you begin making investments real money by using a risk-free practice account to try your strategies.

Options trading fees at RBC Direct Investing commence at $9.95 + $1.25 per contract for regular traders. For more involved traders with more than 150 trades, the price per contract lowers to $6.95 + $1.25 each quarter.

4.9 BMO Investor Line

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BMO InvestorLine is a trading platform for the internet that aims to provide its investors with the best information and professional analysis. It is supported by a sizable bank, the BMO, among Canada’s Big Five banks, like many other items on this list.

Top research on both US and Canadian stocks, tools for analysis like graphs, as well as benchmark monitoring, represent a few of its best features.

Access to more than 2,000 equities on all significant North American Exchanges, including TSX, NYSE, NASDAQ, and others, is provided by BMO InvestorLine.

The smartphone software also allows you to make trades and set up alerts.

A minimum of 15 trades each quarter or a cumulative investment of $250,000 or more entitles you to preferential rates and reduced pricing, as well as specialized customer service and access to tools like MarketPro.

5. What Distinguishes Trading in Options from Trading in Stocks?

Purchasing stock entails purchasing a portion of the business. You have the option to purchase or sell that company’s stock when you trade options. With options, you additionally have the chance to increase your yield while spending less money.

Assume you pay $67 for 100 shares of Company X. $6,700 is the total expense to you before commissions. If the stock increases to $78 when you decide to sell it at that cost, you will have earned $1,100 in total earnings or a 16.4% return.

To use the illustration from earlier, you can purchase one February 70 phone option for $315 ($3.15 multiplied by 100). You may exercise the option and make a total return of $510 [($8.25 – $3.15) x 100] if the option increases to $8.25 as a consequence of the stock reaching $78. That is a 161.9% profit. Even though you don’t earn as much money, you get a higher percentage return on your investment with a much smaller sum.

The only element in common between trading options and stocks is the requirement for a brokerage account.

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6. What to Search For in a Brokerage for Options Trading?

Here are some factors to think about before selecting a brokerage for choice trading in Canada:

Low commissions and trading fees are characteristics of the finest options trading platforms. This should be kept forefront as you select a brokerage because it can rapidly reduce your profits.

Money in the account and the minimal investments: Keep in mind that the majority of brokerages require an initial balance to begin trading options when dealing with options. Verify that you are not taking on more danger than you can bear to lose.

access to data and research: Real-time information is necessary for successful options trading, so be cautious when selecting a data plan as it can mean the difference between earning and losing a lot of money.

Available order categories are: The more market order types a brokerage offers, the more power you’ll have over your investments.

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The Takeaway!

This was all about the topic “Best Canadian broker for options”. Every one of the brokerages has something unique to give. The finest option trading platform is probably the one with which you feel most at ease in terms of usability, dependability, and, most importantly, pricing and commissions.

Check out The 5 Best Investment Options You Have While Living In Canada if you want to know about some of the best options you can have for investing while living in Canada.

Queries and Answers

Some of the most asked questions regarding the topic “Best Canadian broker for options” are listed below:

1. Are options traded in Canada?

A stock must be registered on a Canadian stock exchange, which might be the Toronto Stock Exchange, and its market capitalization must be in the top 25% of all securities posted on Canadian exchanges in order for it to be offered as an option in Canada.

2. Can a Canadian buy Indian options?

A Canadian citizen may also invest in the market in India via the Qualified Foreign Investor (QFI) route; in order to do this, the investor must establish a rupee non-bearing account as well as a depository account, trading account, and demat account. After that, he or she must register for a PAN card as well as go through an identity check with KYC as well as AML.

3. Does RBC trade options?

Orders for options can be placed across the Trading Dashboard. Please be aware that only accounts that have been given the go-ahead to trade options may place options trades. By sending a completed Futures and Margin Agreement form, you can ask to have options trading added to your account.

4. In Canada, are options taxable?

You are going to receive a taxable benefit from employment if you choose to execute your option and purchase the securities for less than fair market value (FMV). The disparity between the price you obtained for the securities as well as their FMV at the moment you executed your option is typically the taxable benefit.



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