CFD Trading Examples

The best way to understand how CFDs work is to follow some examples.

CFD Example: Buying Vodafone

Assume you want to buy 1000 Vodafone CFDs and the exchange price stands at 249.7-249.8p. Our price for Vodafone might be 249.5-250.0, so your CFD position will be opened at the upper price of 250.0p. The full contract value of this position is 1000 x 250.0p or £2500, but to open the contract you need only put down a margin deposit.

Your minimum margin for this position will be 3% of the full contract value, which is £75. The margin required will vary depending on how close you set your stop level to your opening level. All CFDs have a stop-loss order attached to help mitigate losses should the market move against you. If you do not set your own stop level on opening it will be set automatically for you. (Note that stop orders are not guaranteed unless you specify a Guaranteed Stop, for a small premium.)

While your position is open we will adjust your account for overnight financing and any dividends should Vodafone go ex-dividend. (For more information on these adjustments see CFD Trading Costs.)

Suppose a fortnight later Vodafone shares have risen steadily and the underlying price now stands at 268.5-268.6p. Our price for Vodafone is now 268.3-268.8, so you can close your CFD position by selling at the bid price of 268.3.

BUY price 250.0
SELL price 268.3
Difference 18.3p
No. of CFDs 1000
Gross profit £183

To calculate your net profit you should add or subtract any overnight financing and dividend adjustments.

CFD Example: Selling Wall Street

Suppose you want to go short of Wall Street. Our quote for the cash index has a 1-point dealing spread and might be 17463-17464. This means that you can sell at 17463, the lower end of our quote. One CFD contract on Wall Street is worth $1 per index point. You want to risk $3 per point so you sell three CFD contracts at 17463.

As with all trades your position will have an automatic stop-loss order attached. For our Wall Street contracts the minimum margin requirement is 0.3%, so the minimum amount required to open this position is $3 x 17463 x 0.3% =$157.17 (converted into your account currency). There is no commission to pay as all the charge is included in the dealing spread.

SELL price 17463
BUY price 17339
Difference 124 points
Risk per point
Gross profit $372

To calculate your net profit you should also add or subtract your accumulated overnight financing and any dividend adjustments. For examples of how overnight financing is calculated please see the FAQs.

Next steps

For more detail on margin calculations, and further examples, visit our FAQs. You can discover more about CFD trading in several ways: