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Two examples of a CFD trade when compared to a Financial Spreadbetting.
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 |
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| Interest Charge |
£0 |
£0.67 |
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| 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 |
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| Interest Received |
None |
£3.49 |
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| 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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