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Examples of CFD trades when compared to a Financial Spread Betting

CFDs vs SpreadBets
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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:

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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