Put Accumulator Delta

Put Accumulator Delta iconPut accumulator delta describes the change in the fair value of a put accumulator due to a change in the underlying price. The put accumulator delta is the first derivative of the put accumulator value with respect to a change in underlying price. It is depicted as:

\Delta = \frac{dP}{dS}

where P is the put accumulator value and S is the underlying price.

Evaluating Put Accumulator Delta

Put Accumulator Delta = Payout1 x Digital Put Delta(K1) + Payout2 x Digital Put Delta(K2)

+ Payout3 x Digital Put Delta(K3) + Payout4 x Digital Put Delta(K4)

where the terms are the digital put delta with strikes K1, K2, K3 & K4 respectively.

Strikes K1 < K2 < K3 < K4

The payouts in the below examples are:

Payout1 = 40%, Payout2 = 30%, Payout3 = 20% and Payout4 = 10%

In effect the digital put delta is the gradient of the price profile of the digital put option.

Put Accumulator Delta Over Time

The put accumulator delta is displayed against time to expiry in Figure 1. It is not until time to expiry falls to 0.05-days that the ‘stalactites’ of the deltas of the individual strikes is evident. As the underlying price falls the length of the stalactites increases. This absolute increase reflects the increasing payoff of the put accelerator, in this case, 10, 30, 60 and 100.

Put Accumulator Delta w.r.t. Time to Expiry
Figure 1 – Put Accumulator Delta w.r.t. Time to Expiry

The 25-day put accumulator is nearly flat. This is because with 25-days to go the averaging of the individual deltas creates a very low risk strategy. The 25-day profile of put accumulator Figure 2 illustrates that this is an extremely conservative natured option.

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Put Accumulator Delta and Volatility

Figure 2 shows the delta over a range of implied volatilities and 25 days to expiry.

Put Accumulator Delta w.r.t. Volatility
Figure 2 – Put Accumulator Delta w.r.t. Volatility

This amount of time to expiry takes much of the risk element away from trading binaries. Indeed, the value based on the price of four digital puts, plus the amount of time makes this a very dull instrument.


What is apparent from both Figs 1 & 2 is how low the deltas are for, like the call accumulator, the put accumulator. From the market-maker’s perspective this is a very low risk strategy to assume either a long or short position in so one would expect a keenly priced market, which in turn makes it very attractive to the end-user.

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