What are accumulator options? A beginner’s guide to compounding growth

“My wealth has come from a combination of living in America, some lucky genes, and compound interest.” Warren Buffett

Albert Einstein famously called compound interest the “eighth wonder of the world.” Warren Buffett, an icon of financial wisdom, attributes a significant portion of his wealth to its magic.

Introducing, accumulator options — an innovative addition to Deriv’s suite of trade types. Accumulator options offer traders the chance to harness the transformative potential of compounding growth.

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What are accumulator options?

Unlike traditional options, accumulator options thrive on market stability rather than volatility. This trade type allows you to capitalise on sideways movements within a predefined range, offering a unique way to engage with the markets. 

These ranges are determined based on a growth rate that you choose, with rates up to 5% per tick. Your potential payout will compound incrementally based on this rate, as long as the price stays within the specified range from the previous spot price. 

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Why you should trade accumulator options

• Range-based trading: Forget predicting up or down — trade on the sideways movement of an instrument with accumulator options. Your potential profits will grow tick by tick as long as the index stays within a defined range from the previous spot price.
• Customisable ranges: Set your preferred growth rate (up to 5%) to define the range width and potential payout. 
• Flexible durations: Choose your trade length (up to 230 ticks) and control your time commitment and risk exposure. 
• Defined risk: Know your maximum loss before opening your trade. With accumulator options, your loss is limited to your initial trading capital. 
• 24/7 trading: Accumulator options are available on volatility indices, which are available to trade anytime, anywhere, even on weekends and holidays.

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How accumulator options work

Accumulators let you grow your potential payout at a specific growth rate of your choosing. 

When you open an accumulator options trade, barriers are set above and below the instrument’s spot price. Your potential payout grows if the market price stays within these barriers. 

You can close your trade whenever you want. Or if the price touches or jumps out of the range, your trade is automatically closed and you’ll lose your initial trading capital. 

Imagine a scenario where an index has been fluctuating within a 10-point range for a while. You decide to enter an accumulator option with a growth rate of 3% per tick over 100 ticks, speculating that this stability continues.

As each tick passes with the index remaining within your defined range, your potential payout grows exponentially due to the compounding effect. This setup not only aligns with your market outlook but also limits your risk to the initial capital, should the index suddenly break out of its range.

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The crucial balance between risk and reward

While accumulator options offer the potential for compounding growth, it is also a double-edged sword: Selecting a higher growth rate can amplify potential profits, but it also raises the risk of the index breaching the range boundaries. Remember to keep this balance in mind when trading accumulator options. 

Try accumulator options now and observe the power of compounding growth for yourself. Accumulator options are available exclusively on Deriv Trader, and you can trade them on volatility indices. 

Learn more with our free courses on Deriv Academy or sign up for a free demo account which comes with 10,000 USD in virtual funds so you can try it out risk-free. 

Log in to Deriv Academy using your Deriv account email and password to get started.