How to Open an Options Trading Account in Canada

Options can be used to fix a future price of a volatile asset.

Options have become a popular investing tool in North America. The contracts, which offer investors the right to buy or sell a stock or other security for a specified price on or before a specific date, are commonly used to manage risk, to fix a future price of an asset or to diversify an investor's opportunities for capital gains, among other strategies. To begin trading options in Canada, you must open an account that can accommodate this type of trading.

Instructions

1. Find an account provider. Not all brokerage firms in Canada offer options trading accounts. Check financial institutions' websites, call their customer service representatives or go to a local branch to determine whether they offer these accounts. Find out which specific types of options trading a firm's accounts can accommodate, to ensure that the account you open will enable you to execute your desired type of options trading.

2. Apply. To open an options trading account in Canada, you're required to fill out a comprehensive application in which you must provide a variety of information to comply with Canadian regulations. This includes your full name and date of birth, Social Insurance Number, home address, citizenship, your occupation and your spouse's occupation, your employer, details about any third party that has a financial interest or trading authority over your account and the intended use of your account.

3. Provide identification. You will not be permitted to conduct transactions in an options trading account in Canada until you have provided identification required under Canadian laws. This can be a passport, driver's license, citizenship card or birth certificate. Photocopies of these documents are not acceptable, and the documents must not be expired, according to the Investment Industry Regulatory Organization of Canada. Some firms also require you to provide a bank statement dated less than six months old. Firms do not usually accept provincially issued health cards or credit cards as forms of identification.

4. Accept the risks. Options can be very risky, and so before investing in these contracts, you should have a thorough understanding of what they are, how they work and what risks they involve. Your brokerage firm in Canada is required to provide you with documents that disclose the risks associated with trading options. Read these documents carefully, and sign the form that your firm provides to indicate that you're aware of, and willing to take, the risks involved.

5. Fund your account. You can generally deposit money into your options trading account using a wire transfer or electronic fund transfer, a personal check or a bank draft.

References

• Investment Industry Regulatory Organization of Canada: Opening your Retail Account
• TD Canada Trust: TD Waterhouse Options Guide
• Interactive Brokers: Individual Application Instructions
• Qtrade Financial Group: All About Options