Options As Part of an RRSP/TFSA Strategy

Canadians over the age of 18 can take advantage of multiple investment and saving plans to secure their financial freedom. Two of the more popular saving plans include the Tax Free Savings Account (TSFA) and Registered Retirement Savings Plan (RRSP).

Both the TSFA and RRSP offer unique advantages that encourage individuals to start investing as early as possible. This includes investing in the stock market to take advantage of growth opportunities.

Yet unbeknownst to many, investors can gain similar exposure to stocks via options in their TFSA and RRSP accounts.

What is an option?

An option, as the name implies, gives an investor the option to buy and sell a stock at a predetermined price on or before a predetermined date. The main advantage is that options offer investors a cheaper alternative to benefit from the price fluctuation in a stock’s price. 

There are two types of options an investor can buy: a call option and a put option.

A call option gives an investor the right (but not the obligation) to buy a stock at a pre-agreed price (known as a strike price) on or before a pre-agreed expiration date. If an investor expects the price of a stock to rise in value, they can purchase a call option that would in theory rise in unison with the underlying asset.

A put option grants an investor the right (but not the obligation) to sell a stock at a pre-agreed price (similarly known as a strike price) on or before a pre-agreed expiration date. A put option in theory moves in the opposite direction of the underlying asset. That is, if a stock loses value we would expect the value of the put option to rise in value.

Can you buy options in your TFSA or RRSP?

Buying options in your TFSA or RRSP is completely legal and a recognized investment strategy. Section 204 of the Canadian Income Tax Act confirms that options are one of several “qualified investments” available to all investors.

Some of the more common option strategies used in a TFSA and RRSP account include:

  1. Buying call options instead of a stock or ETF outright. In this scenario, an investor can gain exposure to favorable movements in a stock or ETF without committing a large amount of capital.
  2. Buying call options to guarantee an entry point. In this scenario, an investor locks in a purchase price for a stock or ETF regardless of the current market value. 
  3. Buying put options instead of shorting a stock. Buying put options allows investors to profit when a stock or ETF loses value. If the underlying asset rises in price, the investor stands to lose 100% of the investment. By contrast, shorting a stock can result in the investor losing money above and beyond the initial investment.
  4. Covered call writing for advanced investors only. An investor who owns a stock or ETF outright can write a call option and generate new sources of income. The logic of covered call writing is to generate incremental revenue over the long-term.


Investors should consult with a tax expert because trading options in a TFSA account may trigger a tax bill. As the name implies, the TFSA is tax free in nature, but only when used as a long-term savings account. Investors that frequently buy and sell options in their account (akin to day trading) may be in violation of the spirit of the investment account.

However, investors using one or more option strategies in their TFSA as part of a long-term savings and investment strategy have nothing to worry about.

RRSP accounts are always subject to a tax when the investor withdraws their capital. The current tax schedule on RRSP withdrawals is 10% (5% in Quebec) on amounts up to $5,000, 20% (10% in Quebec) on amounts over $5,000, and 30% (15%) in Quebec on amounts over $15,000. 

As is always the case, investors should consult with a tax and/or investment management professional for advice on how to minimize their tax obligations and maximize returns.

Originally Posted on February 1, 2022 – Options as part of an RRSP/TFSA strategy

Dollars expressed are in CAD


The strategies presented in this blog are for information and training purposes only, and should not be interpreted as recommendations to buy or sell any security. As always, you should ensure that you are comfortable with the proposed scenarios and ready to assume all the risks before implementing an option strategy.

Copyright © 2022 Bourse de Montréal Inc. All rights reserved.  Do not copy, distribute, sell or modify this document without Bourse de Montréal Inc.’s prior written consent. This information is provided for information purposes only.  The views, opinions and advice provided in this article reflect those of the individual author.  Neither TMX Group Limited nor any of its affiliated companies guarantees the completeness of the information contained in this publication, and we are not responsible for any errors or omissions in or your use of, or reliance on, the information. This publication is not intended to provide legal, accounting, tax, investment, financial, or other advice and should not be relied upon for such advice. The information provided is not an invitation to purchase securities listed on Montreal Exchange, Toronto Stock Exchange, and/or TSX Venture Exchange. TMX Group and its affiliated companies do not endorse or recommend any securities referenced in this publication.  Montréal Exchange and MX  are the trademarks of Bourse de Montréal Inc.  TMX, the TMX design, The Future is Yours to See., and Voir le futur. Réaliser l’avenir. are the trademarks of TSX Inc. and are used under license.

Disclosure: Montréal Exchange - Option Matters

This material is from Bourse de Montréal Inc. and is being posted with its permission. Opinions expressed in this document do not necessarily represent the views of Bourse de Montréal Inc.

This document is made available for general information purposes only. The information provided in this document, including financial and economic data, quotes and any analysis or interpretation thereof, is provided solely for information purposes and shall not be construed in any jurisdiction as providing any advice or recommendation with respect to the purchase or sale of any derivative instrument, underlying security or any other financial instrument or as providing legal, accounting, tax, financial or investment advice. Bourse de Montréal Inc. recommends that you consult your own advisors in accordance with your needs before making decision to take into account your particular investment objectives, financial situation and individual needs.

Although care has been taken in the preparation of this document, Bourse de Montréal Inc. and/or its affiliates do not guarantee the accuracy or completeness of the information contained in this document and reserve the right to amend or review, at any time and without prior notice, the content of this document.

Neither Bourse de Montréal Inc. nor any of its affiliates, directors, officers, employees or agents shall be liable for any damages, losses or costs incurred as a result of any errors or omissions in this document or of the use of or reliance upon any information appearing in this document.

Disclosure: Canadian Options Trading
Canadian Listed Options involve risk and are not suitable for all investors. Trading of certain standardized Canadian Listed Options may not be permitted for U.S. Residents. For more information read the Characteristics and Risks of Listed Canadian Standardized Options, also known as the options disclosure document (ODD). To receive a copy of the ODD call 877-745-4222 or copy and paste this link into your browser: https://www.cdcc.ca/f_en/Options_Disclosure.pdf

Disclosure: Interactive Brokers

Information posted on IBKR Campus that is provided by third-parties does NOT constitute a recommendation that you should contract for the services of that third party. Third-party participants who contribute to IBKR Campus are independent of Interactive Brokers and Interactive Brokers does not make any representations or warranties concerning the services offered, their past or future performance, or the accuracy of the information provided by the third party. Past performance is no guarantee of future results.

This material is from Montréal Exchange - Option Matters and is being posted with its permission. The views expressed in this material are solely those of the author and/or Montréal Exchange - Option Matters and Interactive Brokers is not endorsing or recommending any investment or trading discussed in the material. This material is not and should not be construed as an offer to buy or sell any security. It should not be construed as research or investment advice or a recommendation to buy, sell or hold any security or commodity. This material does not and is not intended to take into account the particular financial conditions, investment objectives or requirements of individual customers. Before acting on this material, you should consider whether it is suitable for your particular circumstances and, as necessary, seek professional advice.

Disclosure: Tax-Related Items (Circular 230 Notice)

The information in this material is provided for informational purposes only and does not constitute tax advice and cannot be used by the recipient or any other taxpayer to avoid penalties under any federal, state, local or other tax statutes or regulations, or to resolve any tax issue.

Disclosure: Options Trading

Options involve risk and are not suitable for all investors. Multiple leg strategies, including spreads, will incur multiple commission charges. For more information read the “Characteristics and Risks of Standardized Options” also known as the options disclosure document (ODD) or visit ibkr.com/occ