please share a screen shot of your document and layers panel.
Your original question is sort of confusing.
the shadow hovers under the canvas, not the image. Is there a way to crop or fit the canvas to the image exactly?
What are you referring to as a the canvas? Assuming you are referring to your oval button as the "image"?
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Ether way, I would recommend doing this all in CSS
box-shadow: 0 0 11px rgba(33,33,33,.2);
The canvas in Photoshop is always a rectangle. Even with trim it will trim the rectangle to fit the image pixels. You can of course have transparency on the canvas provided you save the image to a file format that supports transparency (such as PNG)