A call option gives you the right to buy a stock at a specific price (strike price) by a specific date (expiration).
Example
Details
Stock: Royal Bank (RY)
Current price: $150
Buy 1 call option
Strike price: $155, expiry: 3 months
Premium paid
$3.50 per share ($350 total for 1 contract of 100 shares)
If RY goes to $165
Option worth $10, profit = $650 (186% return)
If RY stays at $150
Option expires worthless, loss = $350 (100%)
Put Options
A put option gives you the right to sell a stock at a specific price by a specific date.
Example
Details
Stock: Shopify (SHOP)
Current price: $100
Buy 1 put option
Strike price: $95, expiry: 3 months
Premium paid
$4.00 per share ($400 total)
If SHOP drops to $80
Option worth $15, profit = $1,100 (275% return)
If SHOP stays above $95
Option expires worthless, loss = $400 (100%)
Risk Comparison
Scenario
Stock ($10,000 invested)
Options ($10,000 in premiums)
Stock rises 20%
Gain: $2,000 (20%)
Gain: $10,000–30,000+ (100–300%)
Stock rises 5%
Gain: $500 (5%)
Loss: $2,000–5,000 (time decay eats gains)
Stock flat
No change
Loss: $5,000–10,000 (premiums expire)
Stock drops 10%
Loss: $1,000 (10%)
Loss: $10,000 (100% of premiums)
Stock drops 30%
Loss: $3,000 (30%)
Loss: $10,000 (100% of premiums)
Canadian Options Market
Exchange
What Trades
Key Details
Montréal Exchange (MX)
Canadian stock and index options
Primary Canadian options exchange
US exchanges (CBOE, etc.)
US stock and index options
Accessible via Canadian brokerages
Canadian Brokerages That Offer Options
Brokerage
Canadian Options
US Options
Commission
Interactive Brokers
✅
✅
$1.00/contract
Questrade
✅
✅
$9.95 + $1/contract
TD Direct Investing
✅
✅
$9.99 + $1.25/contract
RBC Direct Investing
✅
✅
$9.95 + $1.25/contract
CIBC Investor’s Edge
✅
✅
$6.95 + $1.25/contract
Wealthsimple
❌
❌
N/A
NBDB
✅
✅
$0 + $1.25/contract
Common Options Strategies
Strategy
Risk Level
Description
Best For
Buying calls
High
Bet stock goes up
Bullish speculation
Buying puts
High
Bet stock goes down
Bearish speculation, portfolio insurance
Covered calls
Low-moderate
Own stock, sell calls for income
Income generation on stocks you own
Protective puts
Low
Own stock, buy puts as insurance
Downside protection
Cash-secured puts
Moderate
Sell puts on stock you want to buy
Buying stocks at a discount
Iron condor
Moderate
Sell both call and put spreads
Profiting from low volatility
Tax Treatment in Canada
Aspect
Stocks
Options
Capital gains
50% inclusion rate
50% inclusion rate (for most buyers)
Losses
Can offset capital gains
Can offset capital gains
TFSA/RRSP eligible
Yes — stocks and ETFs
Limited — must be qualified, covered calls allowed
Business income risk
Rare for buy-and-hold
Frequent traders may be taxed as business income (100%)
Options premium (seller)
N/A
Income when option expires, capital gain/loss if exercised
Who Should Trade Options?
Investor Type
Stocks
Options
Beginner
✅ Start here
❌ Too complex
Long-term buy-and-hold
✅ Core strategy
❌ Unnecessary
Income investor with large portfolio
✅ Dividend stocks
✅ Covered calls for extra income
Experienced trader
✅ Core holdings
✅ Hedging and speculation
Speculator
❌ Too slow
✅ Leveraged bets
Frequently asked questions
Are options taxed differently than stocks in Canada?
Yes. Stock gains are taxed as capital gains (50% inclusion rate for individuals). Options are treated as either capital gains or income depending on whether you are a trader or investor — CRA may treat frequent options trading as business income (100% inclusion). Options in registered accounts (TFSA, RRSP) grow tax-free, but CRA restricts certain high-risk options strategies in registered accounts.
Can you lose more than your investment with options?
With long options (buying calls or puts), your maximum loss is limited to the premium paid. With written (short) options, especially naked calls, losses are theoretically unlimited. This is why margin accounts are required for options writing, and why beginners should focus only on covered strategies (e.g., covered calls on stocks you own).
Are options available in a TFSA in Canada?
Yes, some brokers allow limited options strategies in TFSAs. Covered calls (writing calls on underlying stock you hold) are generally permitted. Naked options, spreads, and complex strategies may not be available in registered accounts. Questrade and Interactive Brokers are among the brokers that support TFSA options.