What is options trading?

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Options are timed contracts that give a trader the right, but not the obligation, to buy or sell an underlying asset at a predetermined price within a specific time period.

This means that at any time during your contract’s time period, you can buy or sell the asset at that price, no matter what the actual market price is. If you go through with the transaction, that is called exercising the option.

Essentially, options trading is all about predicting future market movements — if you predict the market will rise, set a lower price to buy your asset; if you think the market will fall, set a higher price to sell the asset. If the market moves according to your prediction and you exercise the option, you’ll gain a profit.

However, options trading on Deriv doesn’t involve an exchange of assets. When you trade options on Deriv, you only predict the market movements and you’ll earn a payout if the market moves in your favour.

Options trading on Deriv
Deriv offers a variety of options types that you can trade on where you don’t need to own the underlying asset:

Digital options – you predict the outcome from two possible results and earn a fixed payout if your prediction is correct.
Lookbacks – your payout is determined by the highest or lowest price point during your contract’s duration.
Call/put spreads – you earn up to a predetermined payout depending on the market price when your contract expires.
You can trade digital options on forex, commodities, stock indices, and our synthetic indices which are available 24/7, including weekends and public holidays. Meanwhile, lookbacks and call/put spreads are available exclusively on synthetic indices.

Deriv offers multiple platforms to trade options — DTrader and SmartTrader are powerful user-friendly trading platforms, while DBot and Binary Bot offer the tools you need to build your own trading bot even if you have no coding experience.

On these platforms, you can customise the parameters of your trade such as trade conditions, your preferred stake or payout amount, or even the contract’s start time if you don’t want your trade to start immediately.

Benefits of options trading on Deriv
Limited risk
When you trade options on Deriv, any potential losses from your trades won’t be affected by huge price fluctuations. In fact, your losses will only be limited to your stake.

Low capital requirement
Options trading allows you to enter the market with minimal capital. On Deriv, the minimum deposit amount to start trading is 5 USD, and the minimum capital to open an options trade is less than 1 USD.

Flexibility
Options trading gives you flexibility as you get to benefit from both rising and falling prices, as opposed to owning the underlying asset and incurring a loss if prices fall. Plus, on Deriv, you get to take advantage of price movements on a variety of financial markets.

Start your options trading journey on Deriv risk-free with a demo account that’s pre-loaded with virtual money. For further reading, here are the differences between CFD trading and options trading.