Presumably CFL contracts allow teams to release players at the teams discretion. The common 1 year plus option year contracts seems to only allow the team to refuse the option, not the player. Is that the case?
Usually but there seems to have been some contracts that have allowed the player to have the option as well. I can recall a few players (can't think of their names off the top of my head) who have been released this off-season because they had been given the option.
The player can not sign elsewhere in the CFL while under option. Options can be exercised by the club, or not. If the club does not exercise they must waive said player and he becomes a FA once that waiver is cleared. Depending on how the option is written the player will be given a portion of his pay if waived. Generally, if said player is picked up by another club in a given time frame, they will not receive that financial compensation. The player does not need to sign the option, but then can not play for another team that season and gets no pay.