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# Examples of CFD trades when compared to a Financial Spread Betting  Written by

## 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:

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.
• IThe 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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