Options: A Brief History & Top Trading Platforms
Synopsis: This article discusses the history of option contracts, the development of option pricing models which led to the establishment of option exchanges, as well as compares the primary Option Trading Platforms available to Canadian investors.
Please note that KeyStone does not endorse or recommend options or derivative trading. Our investment philosophy focuses on a long-term Growth at a Reasonable Price (GARP) investing strategy focused on buying and holding high quality companies (stocks). Options are complex securities and should only be used by sophisticated investors with an in-depth understanding of how they are priced and how they can change the risk/reward profile of your portfolio.
First Recorded Options Trade
The first option trade was accounted through Aristotle, who related a story of the Greek philosopher, Thales – the founder of natural philosophy – who profited from an option-type agreement around the 6th century B.C. Thales had forecasted that the next olive harvest would be exceptionally good and placed a deposit on the local olive presses, securing him the right but not the obligation to rent the presses at the then relatively low rate (entering into a call option). When the harvest proved to be bountiful, boosting the demand and rental prices of presses, Thales exercised his right to rent the presses at the lower pre-determined rate and charged the higher market price for their use, generating a profit.
Over the next two millennia, option contracts gained significant popularity to increase or hedge risk, but options remained difficult to price and option markets remained completely unregulated. Like Thale’s agreement with the olive press owners, option contracts were typically negotiated over the counter (OTC), making it difficult to agree on terms.
Tulip Options – Cautionary Story of Unregulated OTC Markets
The detriment of unregulated OTC markets with no standardization (of contracts) can be seen in the early 1600’s during the infamous Dutch tulip bubble. Tulips were extremely popular among the Dutch aristocracy and as their popularity began to spread across Holland, prices went up dramatically.
To hedge the risk of a bad harvest, Tulip growers began to protect the selling price of their tulips by buying put options (the right to sell at a pre-determined price, but not the obligation). In fact, during this time, the Dutch coined the term “windhandel” or “wind trading” to describe the speculation being taken on the tulip market.
But when the Dutch economy slipped into recession, the bubble burst and the prices of tulips plummeted. Many of the speculators who had sold put options were either unable or unwilling to fulfill their obligations (to buy the now cheap tulips for pre-determined high prices) despite the Dutch Government’s efforts to force speculators to make good on their contracts.
The Birth of Option Exchanges
The standardization of option contracts finally advanced from strictly OTC negotiated contracts to those that trade on an exchange in 1973 when the Chicago Board Options Exchange (CBOE) began trading options on individual stocks. The foundation for this revolution was laid years earlier in the academic community by mathematicians and philosophers.
Louis Bachelier – the forefather of mathematical finance – believed in Brownian Motion commonly known as the “random walk” of the stock market, meaning that upward and downward movements in the market are random and unpredictable. But the collection of these random walks creates a normal distribution. By the time Bachelier finished his PhD thesis in 1900, he had introduced the first pricing model for options.
In the 1970’s, Fischer Black, Myron Scholes and Robert Merton, published research theorizing a more precise method for pricing option contracts. Their approach used an improved model considering factors like volatility, the underlying security’s risk and expected return. This provided a crucial foundation for efficient options pricing where one could input the parameters into a formula and calculate the value of an option.
Source for above formula: https://www.investopedia.com/terms/b/blackscholes.asp
Although the above formula is the standard for options pricing to this day, many practitioners use their own models due to the short comings of the Black-Scholes model’s assumptions, such as its reliance on log-normal distributions (whereas returns in real life typically exhibit skewness) and the assumption that the risk-free rate is constant across the asset return time horizon. Furthermore, the Black-Scholes model has additional short comings for pricing OTC option contracts.
Within just a couple of years, the Black-Scholes formula produced one of the fastest adoptions by industry of an academic idea in all the social sciences. With this revolution, options have become more accessible to retail investors, now available on most online discount brokerage platforms.
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Canadian Option Trading Platform Comparison
This section compares option trading platforms for Canadian traders based on access to markets, trading commissions, currency exchange fees, and other relevant features or limitations. The below information was compiled on July 7th, 2025. Please note that this section does not address account fees but focuses on per trade commission fees.
Interactive Brokers provides investors the most access to option trading markets, with global market access to approximately 30 market centers.
- Option commissions range from USD $0.15 to USD $0.65 per US Option contract, with a minimum per order of USD $1.00. In Canada, IBKR charges between CAD $1.00 to CAD $1.25 per contract, with a minimum per order of CAD $1.50 per share.
- Interactive Brokers has $0 Exercise/Assignment costs for both automatic and directed exercising of options.
- Currency exchange fees for Canadians are USD $2.00 per order (0.20 basis point or 0.002% x trade value, with a minimum of USD $2.00 per order).
- IBKR provides mobile options trading, as well as tools for writing options, option strategy builders (such as straddles, strangles, butterflies, etc.), and option payoff diagrams.
- For advanced option traders looking for low commissions, IBKR is likely one of the best options.
Questrade provides access to options on Canadian and U.S. markets with a price of USD $0.99 or CAD $0.99 per contract, depending on the option exchange.
- Questrade’s Exercise/Assignment costs are $24.95 for both automatic and directed exercising of option contracts. (Charged in currency of the trade).
- Currency exchange fee of 1.5% of the total conversion.
- Questrade provides option traders with mobile trading of options, tools including OptionsPlay which provides option ideas and preset strategies, naked option writing, as well as profit and loss payoff diagrams.
Wealthsimple provides access to options on Canadian and U.S. markets with pricing depending on account size.
- With $1.00 in assets, contracts are as low as USD $2.00 per contract while traders with over $100,000 in assets pay USD $0.75 per contract. All fees are charged in USD and therefore require sufficient USD in your account to cover them.
- Wealthsimple’s Exercise/Assignment costs are $20.00 for automatic exercise while directed exercising of option contracts cost $45.00.
- Wealthsimple does not provide option traders the ability to trade short calls (uncovered), short puts, and spreads.
- Currency exchange fee of 1.50% for amounts between $0-$9,999.99 and 0.75% for amounts between $10,000-$24,999.99.
- Wealthsimple is a good option for beginners as it is relatively straight forward but lacks the depth and complexity desired by some traders such as an option strategy builder (given its limited access to selling options). The platform does allow for mobile trading of options.
Moomoo only provides traders with access to US Options with the minimum of USD $0.65 per contract with or a USD $1.00 minimum per order.
- Moomoo’s Exercise/Assignment costs are $Nil for both automatic and directed exercising of option contracts.
- Currency exchange fee of 0.09% + USD $2 per transaction.
- Moomoo provides access to mobile trading, options volatility analysis, as well as their preset strategies which allow up to 13 types of option strategies (butterfly, calendar spread, diagonal spread, straddle, strangles, etc.).
Q-Trade provides investors access to options on both U.S. and Canadian exchanges with minimum trade commission of $8.75 per trade plus $0.75 per contract. (Commission charged in currency of the trade).
- Q-Trade’s Exercise/Assignment costs are $45.00 minimum for both automatic and directed exercising of option contracts. (Charged in currency of the trade).
- We were unable to uncover how much Q-Trade charges for currency conversions.
- Q-Trade allows for mobile and web trading, and its Qtrade Options Lab which helps individuals to identify option trading opportunities and explore strategies, provides implied volatility ranks and a preview of historical versus current volatility levels.
Canadian Big Banks (TD, RBC, Scotiabank, BMO, CIBC, National Bank)
- The big Canadian Bank’s online self-directed platforms allow traders the ability to trade options on Canadian and U.S. Markets, with per trade commission ranging from $6.25 (National Bank) to $9.99 (TD Direct Investing & Scotia iTRADE), with per contract commission of $1.25 per contract for each. (Commission charged in currency of the trade).
- Exercise/Assignment costs range from $6.95 for automatic exercising plus $1.25 per contract (CIBC Investor’s Edge) to $65.00 (Scotia iTrade), whereas directed exercising of contracts ranges from $35.00 (RBC & BMO) to $65.00 (Scotia iTRADE).
- Each bank’s currency conversion schedule is different. Call your bank for exact commissions on your currency conversions.
- The big bank trading platforms provide investors with many advanced tools for option trading.
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