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How To Trade Options in Canada: Insights from Reddit

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Written by Tim-bot
Reviewed by Friedrich Odermann Fact-checked by Ed Weinberg
Updated 11/17/2023 11 min read

Trading options in Canada involves leveraging a financial instrument that allows you to buy or sell an asset at a predetermined price. Reddit serves as a valuable resource for Canadian traders to share tips, strategies, and experiences. This article aims to cut through the complexity and provide a clear guide on how to get started with options trading in Canada, what platforms to use, and tips from Reddit users.

You should read this article because it demystifies the complexities of options trading in Canada, offering insights from Reddit and a step-by-step guide on platforms, strategies, and tips.

I’ll answer the following questions:

  • What is options trading and why is it important for Canadian traders?
  • How can you educate yourself before diving into options trading in Canada?
  • What should you consider when choosing the right platform for options trading?
  • What are the benefits of using Interactive Brokers (IBKR) for options trading?
  • How does Questrade compare in terms of commissions and pricing with other platforms?
  • What is the current status of options trading on Wealthsimple?
  • What tips and advice do Canadian Reddit users offer for options trading?
  • How can you avoid common mistakes in options trading?

Let’s get to the content!

What Is Options Trading?

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Options trading is a form of derivative trading where you buy or sell options contracts that give you the right, but not the obligation, to buy or sell an underlying asset, like shares of a company. In my years of trading and teaching, I’ve found that understanding options can provide a strategic edge in the market. Options trading can be complex, but it offers various strategies for hedging, speculation, and generating income.

Getting Started with Options Trading in Canada

Before diving into options trading, it’s crucial to educate yourself and practice. The Canadian market offers various investment opportunities, but it’s essential to understand the financial implications and potential tax consequences.

Educate Yourself

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Start by reading books, taking online courses, and participating in discussions on platforms like Reddit’s r/CanadianInvestor subreddit. This is the biggest Reddit group for Canadian traders to discuss their options questions — other subreddits like r/Options feature occasional Canadian members suggesting ideas.

You can also scan QR codes from financial literature to access more in-depth resources. The more you know, the better you’ll navigate the options market.

Practice with Paper Trading

Before putting real money on the line, practice with paper trading. This allows you to test strategies and understand the Greeks, which are essential metrics in options trading. Paper trading gives you a safe haven to make mistakes without financial repercussions.

Choosing the Right Platform for Options Trading

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Selecting the right trading platform is crucial. Your choice should offer a user-friendly app, easy navigation through the menu, and a variety of options for trading.

It’s crucial to explore other platforms to find the one that best suits your needs. Some platforms offer specialized tools for options trading, while others may provide better pricing structures. It’s all about what fits your trading style and risk tolerance.

Doing your due diligence is key. Compare features, read reviews, and consider the user interface. The more research you do, the better your trading experience will be. For a comprehensive list of the best options trading platforms, take a look here.

Interactive Brokers (IBKR)

Interactive Brokers is a popular choice for options trading due to its low commissions and robust trading platform.

Benefits of Using IBKR for Options Trading

IBKR offers advanced trading features, including a variety of spread order types. The platform also provides a wide range of educational resources, making it easier for beginners to get started.

Spread Order Types and Other Features

IBKR allows for complex options strategies through its spread order types. You can also collect avatars as you reach certain milestones, adding a gamified element to trading.

Questrade

Questrade is another platform popular among Canadians for options trading. Questrade offers a robust platform that’s intuitive and user-friendly. It’s particularly beneficial for traders who are just starting out with options. The platform provides a variety of tools that can help you analyze different options strategies, making it easier to decide which trades align with your risk tolerance and objectives.

Moreover, Questrade has a reputation for excellent customer service. If you’re new to options or encounter any issues, you can easily reach out for guidance. This level of support can be invaluable when you’re navigating the complexities of options trading. If you’re interested in learning more about how to trade options with Questrade, check out this detailed guide.

Comparing Commissions and Pricing with Other Platforms

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Questrade offers competitive commissions, especially when trading ETFs. It’s essential to compare these costs with other platforms to ensure you’re getting the best deal.

Using Questrade for Protective Strategies

Questrade is excellent for protective options strategies. It offers a range of tools and resources to help you hedge your investments effectively.

Wealthsimple Trade

Wealthsimple is a newer platform that’s gaining traction among Canadians, especially those interested in a simplified trading experience.

Current Status of Options Trading on Wealthsimple

As of now, Wealthsimple doesn’t offer options trading, but it’s a platform to watch. They are planning to add options trading to their services.

Comparing Commissions with Other Platforms

Wealthsimple offers commission-free stock trading, making it an attractive option for those who primarily trade stocks and are looking to diversify into options in the future.

Tips and Advice from Canadian Reddit Users

Reddit is a great starting point, but don’t rely solely on it. The more educated you are, the better your trading decisions will be. Education helps you understand the market dynamics, recognize patterns, and make informed choices.

There are various resources available, from online courses to webinars and eBooks. The key is to be a lifelong learner in this ever-changing market. For a deep dive into the world of options trading, read this comprehensive guide.

Understanding the Canadian Options Market

Reddit users often discuss the nuances of the Canadian options market, including its smaller size compared to the US market. This is crucial information for anyone looking to dive into options trading.

Using Canadian Options for Protective Strategies

Reddit threads frequently focus on using options for protective strategies, emphasizing the importance of hedging your investments, especially in volatile sectors like tech companies.

Benefits of Trading Options on The US Market Through Canadian Platforms

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Many Reddit users recommend trading options on the US market through Canadian platforms and app stores. This allows for diversification and potentially higher returns, although it comes with its own set of challenges, such as currency conversion fees.

Avoiding Common Mistakes

Thanks to investing newbies and crooks, many options account holders have been fooled into treating their options calls and puts like buying into the collectibles market. Many Reddit gurus are actually advertisers in disguise, their titles notwithstanding.

Importance of Not Trading What You Don’t Understand

One common piece of advice is to avoid trading options you don’t understand. This is crucial, as options can be complex and risky.

Researching and Practicing Before Committing Real Money

Another tip is to research and practice before committing real money. Reddit users often share their mistakes and lessons learned, providing valuable insights for newcomers.

Key Takeaways

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Options trading in Canada can be a lucrative venture if done correctly. The key is to educate yourself, choose the right platform, and heed advice from experienced traders, including those on Reddit. Always remember, the more you know, the better you’ll navigate the complex world of options trading.

Trading isn’t rocket science. It’s a skill you build and work on like any other. Trading has changed my life, and I think this way of life should be open to more people…

I’ve built my Trading Challenge to pass on the things I had to learn for myself. It’s the kind of community that I wish I had when I was starting out.

We don’t accept everyone. If you’re up for the challenge — I want to hear from you.

Apply to the Trading Challenge here.

Trading is a battlefield. The more knowledge you have, the better prepared you’ll be.

Have you traded options in Canada? Let me know in the comments — I love hearing from my readers!

Frequently Asked Questions

Are There Any Free Trade Platforms for Options Trading in Canada?

Currently, there are no platforms that offer completely free options trading in Canada. However, some platforms like Wealthsimple offer commission-free stock trading.

How Do Commissions for Options Trading in Canada Compare to Other Countries?

Commissions for options trading in Canada are generally competitive, especially when compared to other countries. However, it’s essential to consider all fees, including currency conversion if you’re trading on the US market.

Can I Trade Options on the US Market Using Canadian Platforms?

Yes, you can trade options on the US market using Canadian platforms like Interactive Brokers and Questrade. However, be mindful of currency conversion fees and potential tax implications.


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Author card Timothy Sykes picture

Timothy Sykes

Tim Sykes is a penny stock trader and teacher who became a self-made millionaire by the age of 22 by trading $12,415 of bar mitzvah money. After becoming disenchanted with the hedge fund world, he established the Tim Sykes Trading Challenge to teach aspiring traders how to follow his trading strategies. He’s been featured in a variety of media outlets including CNN, Larry King, Steve Harvey, Forbes, Men’s Journal, and more. He’s also an active philanthropist and environmental activist, a co-founder of Karmagawa, and has donated millions of dollars to charity. Read More

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* Results are not typical and will vary from person to person. Making money trading stocks takes time, dedication, and hard work. There are inherent risks involved with investing in the stock market, including the loss of your investment. Past performance in the market is not indicative of future results. Any investment is at your own risk. See Terms of Service here

The available research on day trading suggests that most active traders lose money. Fees and overtrading are major contributors to these losses.

A 2000 study called “Trading is Hazardous to Your Wealth: The Common Stock Investment Performance of Individual Investors” evaluated 66,465 U.S. households that held stocks from 1991 to 1996. The households that traded most averaged an 11.4% annual return during a period where the overall market gained 17.9%. These lower returns were attributed to overconfidence.

A 2014 paper (revised 2019) titled “Learning Fast or Slow?” analyzed the complete transaction history of the Taiwan Stock Exchange between 1992 and 2006. It looked at the ongoing performance of day traders in this sample, and found that 97% of day traders can expect to lose money from trading, and more than 90% of all day trading volume can be traced to investors who predictably lose money. Additionally, it tied the behavior of gamblers and drivers who get more speeding tickets to overtrading, and cited studies showing that legalized gambling has an inverse effect on trading volume.

A 2019 research study (revised 2020) called “Day Trading for a Living?” observed 19,646 Brazilian futures contract traders who started day trading from 2013 to 2015, and recorded two years of their trading activity. The study authors found that 97% of traders with more than 300 days actively trading lost money, and only 1.1% earned more than the Brazilian minimum wage ($16 USD per day). They hypothesized that the greater returns shown in previous studies did not differentiate between frequent day traders and those who traded rarely, and that more frequent trading activity decreases the chance of profitability.

These studies show the wide variance of the available data on day trading profitability. One thing that seems clear from the research is that most day traders lose money .

Millionaire Media 66 W Flagler St. Ste. 900 Miami, FL 33130 United States (888) 878-3621 This is for information purposes only as Millionaire Media LLC nor Timothy Sykes is registered as a securities broker-dealer or an investment adviser. No information herein is intended as securities brokerage, investment, tax, accounting or legal advice, as an offer or solicitation of an offer to sell or buy, or as an endorsement, recommendation or sponsorship of any company, security or fund. Millionaire Media LLC and Timothy Sykes cannot and does not assess, verify or guarantee the adequacy, accuracy or completeness of any information, the suitability or profitability of any particular investment, or the potential value of any investment or informational source. The reader bears responsibility for his/her own investment research and decisions, should seek the advice of a qualified securities professional before making any investment, and investigate and fully understand any and all risks before investing. Millionaire Media LLC and Timothy Sykes in no way warrants the solvency, financial condition, or investment advisability of any of the securities mentioned in communications or websites. In addition, Millionaire Media LLC and Timothy Sykes accepts no liability whatsoever for any direct or consequential loss arising from any use of this information. This information is not intended to be used as the sole basis of any investment decision, nor should it be construed as advice designed to meet the investment needs of any particular investor. Past performance is not necessarily indicative of future returns.

Citations for Disclaimer

Barber, Brad M. and Odean, Terrance, Trading is Hazardous to Your Wealth: The Common Stock Investment Performance of Individual Investors. Available at SSRN: “Day Trading for a Living?”

Barber, Brad M. and Lee, Yi-Tsung and Liu, Yu-Jane and Odean, Terrance and Zhang, Ke, Learning Fast or Slow? (May 28, 2019). Forthcoming: Review of Asset Pricing Studies, Available at SSRN: “https://ssrn.com/abstract=2535636”

Chague, Fernando and De-Losso, Rodrigo and Giovannetti, Bruno, Day Trading for a Living? (June 11, 2020). Available at SSRN: “https://ssrn.com/abstract=3423101”