One of the major trends observed in the Canadian trading industry in early 2025 is the rise of short-term options trading. With ongoing market volatility and economic uncertainty driving price action, traders are increasingly flocking to zero-day-to-expiration (0DTE) options and shorter-dated contracts to profit from near-term market-moving events.
Low costs and quick returns have made short-term options widely popular in Canada. In 2023, the Montréal Exchange reported a record equity options volume, with 697,825 contracts traded on November 17, 2023, and 7,961,730 contracts for the year. Their increasing power in daily market activity is partly attributable to the rise of retail traders and increased liquidity.
“Traders are gravitating toward short-term options as they give flexibility and a quick turnaround,” says Matt Choi, founder of Certus Trading Inc. “They can be a powerful tool to generate profit for those looking to capitalize on intraday market moves if the mindset is focused and disciplined.”
Flattening interest rate policies from the Federal Reserve are a component of what drives short-term options trading. Traders use these options to hedge exposure to volatile market moves driven by inflation reports, jobs data, and other central bank decisions. Data from the Montreal Exchange shows a notable increase in options volume on days when important economic reports are released. Soon after these events, prices fluctuate, forming ideas for traders capable of being proactive. “It is important to know when economic reports come out and how they potentially impact the market. Traders who expect these changes can prepare accordingly,” explains Choi.
Retail participation has also been a factor in the growth of short-term options trading in Canada. In 2021, ETF options trading volumes increased by 20.4%, and equity options grew by 34.9%. This increase in retail activity has led significant exchanges, including the Montréal Exchange, to focus on servicing retail investors and improving liquidity. This shift has resulted in better market access for smaller traders.
“Canadian retail traders appear to be getting more active in short-term options. They’re setting them up so they can capitalize on market fluctuations in a way that used to be available only to institutional investors,” says Choi.
The participation of thousands of retail traders in short-term options has contributed to an increase in activity within this segment. 0DTE options have quickly been adopted by hedge funds and algorithmic trading firms as part of their risk management and portfolio return strategies. Institutional investors have expanded their presence in options trading in recent years, driving more market activity. Moreover, algorithmic strategies have helped fuel trading volumes, as firms execute thousands of trades per second to take advantage of micro-movements in stock prices.
While short-term options offer the potential for quick returns, they also come with risks. Because these trades move fast, some losses can add up quickly if not properly managed. Many 0DTE options expire worthless, leading dealers to sell more exposure than they buy. Retail traders often face challenges in this space because of poor timing, volatility mispricing, and a lack of exit strategies.
“Short-term options can be lucrative but require discipline, a strong risk management plan, and clear exit strategies. They can be just as risky as they are rewarding without a disciplined approach,” Choi concludes.
Short-term options trading is expected to remain a strong driving force in the Canadian market in 2025. Those who understand these contracts and apply sound risk management can take advantage of this changing trend. As more retail and institutional traders enter the market, the impact of macroeconomic events will likely stay a defining aspect of this segment.
