Synthetic indicesUpdated 3 min readBy the FXNOD team
Options vs CFDs: what is the difference?
An option is a contract with a fixed cost: you pay a stake, and the most you can lose is that stake. A CFD, or contract for difference, tracks the price of a market with leverage: profit and loss grow with every point the price moves and are not fixed in advance. Options limit the loss per trade. CFDs do not, unless you set a stop.
Side by side
| Options (as offered by Deriv) | CFDs | |
|---|---|---|
| What you pay | A stake | Margin, a fraction of the position |
| Most you can lose on a trade | The stake | Depends on size, leverage and your stop |
| Profit | Set by the contract's payout | Grows with the price move |
| Ends | At expiry, or when a barrier is hit | When you close it or are stopped out |
| Costs | Built into the payout | Spread, commission and overnight swap |
| Leverage | None in the usual sense | Yes, often high |
| Being roughly right | Often pays nothing | Pays in proportion |
How the risk feels different
With an option, the worst case is known before you buy. The danger is repetition: many small total losses add up fast, especially on contracts lasting seconds. With a CFD, a single position can lose far more than you intended if it is too large or has no stop. The danger is one trade.
What each rewards
- Options reward being right about a specific outcome by a specific time.
- CFDs reward being right about direction, and let you hold while you are.
- A fixed-payout option pays the same whether the price barely crosses the line or runs far past it.
- A CFD pays more the further the price goes, and costs more the further it goes against you.
Who each suits
| If you | Consider |
|---|---|
| Are starting and want a capped loss per trade | Options, on a demo account first |
| Want to automate very short trades | Options |
| Analyse real markets and hold for hours or days | CFDs, with careful position sizing |
| Do not yet understand margin and leverage | Not CFDs |
On Deriv and in FXNOD
Deriv lists options on Deriv Trader and Deriv Bot, and CFDs on Deriv MT5, Deriv cTrader and TradingView. It warns that CFDs carry a high risk of losing money rapidly due to leverage. Trade Pilot, Bot Forge and Auto Hub trade options and multipliers on your Deriv account. They do not trade CFDs.
Questions people ask
- Are options safer than CFDs?
- The loss on a single option is capped at the stake, which a CFD's is not. Options can still empty an account through many losing trades.
- Are options and CFDs the same?
- No. An option has a fixed cost and a defined outcome. A CFD is an open position whose profit or loss follows the price.
- Which is better for beginners, options or CFDs?
- Options are simpler to reason about because the loss per trade is fixed. Learn either on a demo account.
- What is a multiplier, then?
- A product between the two: it follows the price with a multiplier like a CFD, and caps the loss at the stake like an option.
Trade a synthetic index on demo
Pick any index your Deriv account offers in Trade Pilot, or let a bot trade it at a flat stake with a required stop loss. Virtual funds first.
Get started