If you are looking for the best options trading platforms in Canada, this article offers suggestions to get you started.

Choosing between brokerage platforms can be challenging as their strengths vary when considering core features including trading commissions, order types, research tools, market data, and customer support.

For options trading, in particular, you also want to ensure the platform is easy to navigate especially if you are new to options investing.

For advanced traders, check that it supports the complex strategies you are looking to execute.

Best Online Brokerages For Options Trading in Canada

Below, I cover 6 of the best options trading platforms in Canada.

1. Questrade

Questrade is one of the best trading platforms in Canada for options, stocks, ETFs, and other financial securities.

As of this writing, Questrade has over $25 billion in assets under management and opens 200,000+ new accounts every year.

Beginners and experienced investors can choose from several Questrade trading platforms including:

Advanced traders looking to deploy multi-leg option strategies can use Questrade Edge. The standard trading commission for options trades is $9.95, plus a $1 fee per contract. Active options traders get a discount and can choose between fixed or variable fee schedules:

There is also a $89.95 monthly fee for advanced live streaming market data that is rebated partially or fully depending on how much you pay in commissions each month.

Note that U.S. and Canadian data packages are offered separately ($89.95 USD or CAD).

For you to trade any assets on Questrade, you need to deposit at least $1,000 in your new account. For options trading, it has four approval levels with different minimum balance requirements.

Questrade’s four options levels and the minimum balances needed are:

Level 1: No minimum. You can use long calls and puts, long straddle/long strangle, short covered call, and long married put strategies.

Level 2: No minimum. Strategies available include long covered call, short married put, long collar, and short collar (in addition to the ones available in level 1).

Level 3: $5,000 CAD minimum. Additional strategies available at this level include long/short vertical call/put, long butterfly, long condor, short butterfly, short condor, short iron butterfly, short iron condor, long iron butterfly, and condor.

Level 4: $25,000 CAD minimum. Also includes short calendar call/put, short diagonal call/put, long/short calendar call/put with European options, long/short diagonal call/put with European options, short straddle, short strangle, and short option.

Learn more about Questrade in this review.

2. TD Direct Investing

TD Direct Investing is a division of TD Waterhouse Canada which is owned by The Toronto-Dominion Bank. It is one of the best options trading brokerages owned by a big bank.

TD Direct Investing supports a variety of investment products including options, mutual funds, stocks, GICs, ETFs, and bonds.

Depending on your experience with online trading, you can choose from one of its three trading platforms: WebBroker, TD app, and the Advanced Dashboard.

All three platforms offer multi-leg options strategies (up to 2 legs), however, the Advanced Dashboard also supports streaming market data, advanced option analytics, charting, and order types (26 pre-defined option strategies).

The base trading commission for options is $9.99 plus $1.25 per contract.

Active traders who place at least 150 trades per quarter pay $7.00 + $1.25 per contract.

The fee for real-time streaming level 1 and 2 data varies from free to as high as $229/month depending on your trading activity, asset size, and data package.

Learn more in this review of TD Direct Investing.

3. Interactive Brokers Canada

Interactive Brokers aka IBKR is a global securities firm with operations in 33 countries and more than 135 markets.

For the purposes of this article, it is the best online brokerage for options trading if you are an advanced trader.

IBKR’s trading platforms include a standard web application, Trader Workstation, IBKR mobile, and various API solutions.

While all these platforms can be used to place option trades, Trader Workstation is your go-to for advanced options orders, algorithmic trading, and analysis.

Some of the options trading tools on Trader Workstation include write/rollover options tool, OptionsTrader, Option Portfolio, Options Strategy Builder, Options Strategy Lab, Volatility Lab, and more.

The mobile app is also very versatile, offering level II market data, technical analytical tools, streaming news services, alerts, and access to third-party research.

Trading commissions on IBKR for options in US and Canadian markets vary based on volume:

Volume Canada U.S.
<=10,000 $1.25 per contract $0.25-$0.65 per contract
10,001-50,000 $1.15 per contract $0.25-$0.50 per contract
50,001-100,000 $1.05 per contract $0.25 per contract
=>100,001 $1 per contract $0.15 per contract

The minimum fee per order in Canada is $1.50 CAD, while for U.S. trades, the minimum is $1.00 USD.

Note that the tiered pricing for U.S. trades also varies based on the premium.

In addition to trading commissions, other regulatory and exchange fees may apply.

While commission-free options trading is not available in Canada, these are some of the lowest fees you will pay when trading options.

Advanced market data package fees vary from free to as high as $120.75 USD per month.

Read more about this platform in our detailed Interactive Brokers review.

4. Qtrade

Qtrade Direct Investing is owned by Aviso Wealth and is the main brokerage platform used by credit unions in Canada.

It offers multiple investment securities including options, GICs, ETFs, mutual funds, stocks, and new issues.

Qtrade investors can place trades using the website or mobile app (Android and iOS devices). Also, a trial account is available for 30-days if you want to get a feel for how the platform works.

The base fee for options trades on Qtrade is $8.75, plus a $1.25 fee per contract.

Active traders who place 150 or more trades per quarter or have $500,000+ in assets qualify for Investor Plus pricing which is $6.95 + $1.25 per contract.

Learn more in this Qtrade review.

5. National Bank Direct Brokerage

Owned by the National Bank of Canada, National Bank Direct Brokerage offers some of the cheapest ways to trade options in Canada.

Its main trading platform offers various trading tools including Trading Central, Market-Q, Options Play, Decision-Plus, alerts, watchlists, and more.

When National Bank Direct Brokerage (NBDB) announced it was going to start offering commission-free trades for stocks and ETFs this past summer, it became the only bank-owned brokerage to do so.

The standard commission for options trades is $0 plus $1.25 per contract, with a minimum of $6.25 per transaction.

Get more details in our National Bank Direct Brokerage review.

6. CIBC Investor’s Edge

CIBC Investor’s Edge is another bank-owned brokerage platform for options trading in Canada.

Compared to TD Direct Investing, it has lower standard trading fees. You can use the CIBC Investor’s Edge trading platform to screen and filter assets, access research reports, and advanced charting tools.

The trading commission for options is $6.95 plus $1.25 per contract.

If you qualify for active trader pricing (make more than 150 trades/quarter), you pay $4.95 + $1.25 per contract.

Learn more in this review of the CIBC Investor’s Edge platform.

What are Options?

An option is a derivative, a contract that gives the buyer the right, but not the obligation, to buy or sell the underlying asset by a certain date (expiration date) at a specified price (strike price).

The two main types of options are calls and puts.

A call option gives you the right to buy the underlying asset (e.g. a stock) at a specific price on or before a specific date.

A put option gives you the right to sell the underlying asset.

Depending on how your options perform relative to the price of the underlying asset (stock) and the cost of the options contract (i.e. premium), you can choose to:

How Do Options Work?

Options contracts are generally priced per 100 shares or units of the underlying asset.

Call Options:

Assuming that your favourite company’s stock (stock A) is currently selling at $70 per share and you expect it to rise in the coming months.

You decide to buy one “call option” at a strike price of $70 for $5 per share. Since the option contract comprises 100 shares, you pay $500 ($5 x 100 shares) for the contract (i.e. the premium).

Your bet pays off and stock A’s price rises to $85 prior to the expiration of your contract.

Since you have the right to buy 100 shares of stock A at $70, you exercise this right, buy 100 shares at $70 and sell them for $85 each.

Theoretically, your profit per share is $10 (i.e. $15 minus the $5 premium you paid initially), and $1,000 total, for a 200% return.

In this scenario, you only make a profit if the stock rises above $75.

If the stock does not budge in price until expiration or falls, your losses are limited to the $500 premium.

Put Option:

You can also play this in the reverse by buying a “put option” if you believe the company’s stock is set to decline.

Let’s say you buy one put contract at the $70 strike price for $500.

If the price falls to $55 on or before expiration, you can exercise the right to sell 100 shares of stock A at $70 by buying it at $55 and selling for $70 each. This makes for a $1,000 profit ($1,500 minus the $500 premium).

Your breakeven price is $65.

Should I Invest in Options?

The two examples described above are the most basic options strategies available. It gets increasingly complex with some strategies even exposing you to unlimited downsides (losses).

Unless you know what you are doing, my advice is to stay away from options trading until you have learned the basics.

One other thing to consider is leverage. Some brokerages require you to use a margin account for complex options trades.

While borrowing using a margin account can amplify your profits, it also does the same to your losses.

In addition, you could have a margin call and be forced to close out your positions.

This content was originally published here.