CFDs and SpreadBetting Compared

Two examples of a CFD trade when compared to a Financial Spreadbetting.
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Two examples of a CFD trade when compared to a Financial Spreadbetting.

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Example 1 - Share Dealing

We wish to take a Long position in Barclays in anticipation of a rise in price and wish to expose ourselves to 1000 Shares:

Notes:

The interest rate on the CFD is calculated as follows:
Value of position = 1000 Shares x £4.43 (the Mid price) = £4430
Interest @ 5.5% p.a. of the total position = £4430 x 5.5% = £243.65 p.a.
£243.65 divided by 365 = £0.667.
(Please do check exactly how the Interest charge is computed with the providers - there will be differences).
The wider spread and higher price on the Financial Spreadbet reflects that it is a quarterly contract and takes account of Interest and Dividends.
The profit is calculated by valuing the positions at the prevailing potential closing price of the position i.e. the Bid Price - Opening Offer price x Size of Exposure.
Interest will accrue on the CFD Daily until the position is closed.
No interest would have accrued had the position not been held overnight.

Example 2 - Index Trading

We wish to take a Short position on the Dow Jones Index in anticipation of a fall in price:

Notes:

The Notional Trading Requirement on the Financial Spreadbet is usually at a fixed level e.g. 400 - you would multiply this number by your stake to calculate your Margin Requirement e.g. 400 x £10 = £4000.
The interest rate on the CFD is calculated as follows:
Value of position = £10 Per point x 8486.5 (the latest Mid price) = £84,865
Interest @ 1.5 % p.a. of the total position = £84865 x 1.5% = £1272.97 p.a.
£1272.97 divided by 365 = £3.487.
(Please do check exactly how the Interest charge is calculated - there will be differences.)
The wider spread and higher price on the Financial Spreadbet reflects that it is a quarterly contract and takes account of Interest and Dividends.
The profit is calculated by valuing the positions at the prevailing potential closing price of the position i.e. the Offer Price - Opening Bid Price x Size of Exposure.
Interest will accrue on the CFD Daily until the position is closed.

Example 1 - Share Dealing

We wish to take a Long position in Barclays in anticipation of a rise in price and wish to expose ourselves to 1000 Shares:

	Financial Spreadbet	Contract for Difference
Bid Price	£4.2935	£4.275
Offer Price	£4.3075	£4.285
Type of Contract	Quarterly	Open until Closed
Size of Exposure	£10 per point	1000 Shares
Value of Contract	£4307.50	£4285
Commission (if applicable)	£0	£10.71 (0.25%)
Margin Requirement at 10%	£430.75	£428.50
Price appreciates 15p and the position is held overnight.
Bid Price	£4.4435	£4.425
Offer Price	£4.4575	£4.435

Interest Charge	£0	£0.67


Current Profit	13.6 points @ £10	14p x 1000 Shares Less interest & Commission
Profit £'s	£136	£128.62

Notes:

The interest rate on the CFD is calculated as follows:
Value of position = 1000 Shares x £4.43 (the Mid price) = £4430
Interest @ 5.5% p.a. of the total position = £4430 x 5.5% = £243.65 p.a.
£243.65 divided by 365 = £0.667.
(Please do check exactly how the Interest charge is computed with the providers - there will be differences).
The wider spread and higher price on the Financial Spreadbet reflects that it is a quarterly contract and takes account of Interest and Dividends.
The profit is calculated by valuing the positions at the prevailing potential closing price of the position i.e. the Bid Price - Opening Offer price x Size of Exposure.
Interest will accrue on the CFD Daily until the position is closed.
No interest would have accrued had the position not been held overnight.

Example 2 - Index Trading

We wish to take a Short position on the Dow Jones Index in anticipation of a fall in price:

	Financial Spreadbet	Contract for Difference
Bid Price	8534	8559
Offer Price	8544	8564
Type of Contract	Quarterly	Open until Closed
Size of Exposure	£10 per point	£10 per point
Value of Contract	£85,340	£85,559
Margin Requirement at 5%	£4267	£4279
Price falls 75 points and the position is held overnight.
Bid Price	8459	8484
Offer Price	8469	8489

Interest Received	None	£3.49


Current Profit	65 Points @ £10	70 Points @10
Profit £'s	£650	£703.49

Notes:

The Notional Trading Requirement on the Financial Spreadbet is usually at a fixed level e.g. 400 - you would multiply this number by your stake to calculate your Margin Requirement e.g. 400 x £10 = £4000.
The interest rate on the CFD is calculated as follows:
Value of position = £10 Per point x 8486.5 (the latest Mid price) = £84,865
Interest @ 1.5 % p.a. of the total position = £84865 x 1.5% = £1272.97 p.a.
£1272.97 divided by 365 = £3.487.
(Please do check exactly how the Interest charge is calculated - there will be differences.)
The wider spread and higher price on the Financial Spreadbet reflects that it is a quarterly contract and takes account of Interest and Dividends.
The profit is calculated by valuing the positions at the prevailing potential closing price of the position i.e. the Offer Price - Opening Bid Price x Size of Exposure.
Interest will accrue on the CFD Daily until the position is closed.

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