Thinking about diving into trading but not sure whether CFDs or options are the way to go? No worries! We’re breaking it all down-how they work, their pros and cons, and which one might be the best fit for your trading style. Let’s get started!

What is CFD trading? 

A Contract for Difference (CFD) lets you trade on price movements of stocks, indices, commodities, forex, cryptocurrencies, and derived indices—without actually owning the asset. You simply predict whether the price will go up or down and cash in on the difference.

Where can you trade CFDs on Deriv?

• Deriv MT5
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• Deriv cTrader
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• Deriv X

How does CFD trading work? 

Going long: Betting on a price increase 

If you believe an asset’s price will go up, you place a buy order. If the price rises, you sell at a higher price and keep the difference as profit.

Example: You buy a CFD at $100 and later sell it at $110. That’s a $10 profit per unit!

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Going short: Profiting from a price drop 

If you think an asset’s price will fall, you place a sell order. When the price drops, you buy back at a lower price and pocket the difference.

Example: You sell a CFD at $110 and buy it back at $100. That’s a $10 profit per unit!

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The role of margin in CFD trading 

One of the biggest draws of CFD trading is leverage-you only need to deposit a small percentage of the trade value (margin) to control a larger position. This boosts your potential profits, but also your potential losses.

Example: If Apple stock is trading at $210 and you want to buy 10 CFD contracts:

• Total trade value = $210 × 10 = $2,100
• Required margin (10%) = $210

If the price jumps to $215, your new trade value is $2,150, and you make a $50 profit. But if it drops to $205, you’d lose $50. With leverage, things can swing fast!

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What is options trading? 

Options trading lets you speculate on price movements by buying and selling contracts rather than the asset itself. You decide if the price will go up or down, and if you’re right, you earn a payout!

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Where can you trade options on Deriv?

• Deriv Trader
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• Deriv Bot
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• Deriv GO

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Types of options on Deriv 

• Digital Options: Predict price movement and earn a fixed payout if correct.
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• Accumulator Options: Profit grows by up to 5% per tick when prices stay in range.
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• Vanilla Options: Choose Call (higher) or Put (lower) at contract expiry.
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• Turbo Options: Predict if the market price will stay above or below a barrier.
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• Multipliers: Use leverage (up to 2,000x) for amplified profits (and risks!).

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CFDs vs. Options: Key differences 

Leverage

• CFDs: Traded with leverage, meaning higher risk and higher reward.
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• Options: You only risk your stake, so losses are capped.

Trade duration

• CFDs: No expiration-hold as long as you want (if you have enough margin!).
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• Options: Expire in set timeframes-ticks, minutes, days, etc.

Profit potential

• CFDs: Based on the difference between your entry and exit prices.
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• Options: Earn fixed or variable payouts depending on contract type.

Risk exposure

• CFDs: Losses can exceed your initial investment if the market moves against you.
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• Options: Losses are limited to your stake, making it a lower-risk choice.

Trade outcome

• CFDs: Profit/loss depends on price movement when you close the trade.
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• Options: Payout is predetermined based on market movement.

Which trading style suits you? 

• CFDs: Great for traders who want flexibility and leverage to maximize potential gains (and can handle the risks!).
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• Options: Ideal for traders who prefer structured payouts and controlled risk.

Not sure yet? Try a Deriv demo account with $10,000 in virtual funds and practice risk-free!

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