CFDs in Detail

Here we break down the various costs and deposits required to run a CFD position. The most significant of these is the margin deposit, but you should also take note of the possible dividend adjustments and overnight financing (which can be debited from or credited to your account). These are designed to reflect as closely as possible the effects of an actual physical purchase (or sale).

When you trade CFDs you put down a deposit known as margin to open your position, calculated as a fraction of the full value of the position

All InterTrader CFDs have an automatic stop loss order attached, and the level of this order determines your margin requirement to open the position. Each of our markets has a Min IMR (or Minimum Initial Margin Requirement) which indicates the minimum funds required to open a trade. Your stop loss will be placed at 80% of this. For instance, the Min IMR for most of the FTSE 100 shares is 3% of the total position value and your stop will be placed at a distance of 80% of this.

Example. You buy 1000 BP CFDs at 500p. The full contract value of such a trade is £5000 (1000 x 500p) and the minimum margin requirement is 3%, so £150. Whilst the minimum margin required is just 15p out of the 500p you're exposed to, the automatic stop loss is placed at 80% of 15p, which is 12p. So your stop is placed 12p away from your opening level at 488p, meanwhile the trading resources used will still be 15p (£150). You can of course amend your stop loss to a level that suits you, as long as there are sufficient funds in your account.

Each of our markets also has a Max CGSL (or Maximum Computer Generated Stop Level) which determines the furthest away the system will place the automatic stop loss (which you can amend). The maximum distance the system will place your stop loss is calculated as 80% of the Max CGSL, so for major UK shares (where the Max CGSL is 10%) the system will place your stop at a distance of 8% of the market price, but your margin to open the position will be 10% of the contract value. Of course you can amend your stop loss to be closer or further away (subject to sufficient funds being in your account).

Take the same example of buying 1000 BP CFDs at 500p. As 8% of 500p is 40p the system will place your stop loss 40p from your opening level at 460p and your margin to open the position will be 10% of £5000, or £500.

If you do not set your stop level when you open your position our system will automatically generate a stop-loss for you. This will be calculated as 80% of the funds available on your account or 80% of the Max CGSL, whichever is the lower. You can alter your stop level once the position is open, but take note that this will also affect your margin requirement on the position. You can also choose to make your stop-loss ‘trailing’. This means that your stop level will adjust automatically when the market moves in your favour, to lock in your gains.

(Stop-losses are not guaranteed -unless you specifically select for your stop to be guaranteed- and markets can, on occasion, jump straight through your requested level. If that happens you will be closed out at the next best level.) Click here for more details about Guaranteed Stop Orders.

The cost to open a CFD position is included in the dealing spread, much the same as with spread betting.

While your position is open your account is also debited or credited to reflect the financial cost or benefit of holding the equivalent physical purchase. For instance, if you held a long position your CFD account is debited overnight financing, based on the applicable interest rate of your trading currency, for as long as you hold the position. Likewise you can be credited (but not always) overnight interest when you hold a short position.

Your account will also be credited or debited to reflect the value of any dividends on shares that go ex-dividend when you have a relevant CFD position open. If you are long you will receive 80% of the dividend, while if you are short you will be debited 100% of the dividend.

Payment is credited or debited to your account on the ex-dividend date. Dividend adjustments apply to equity and index markets.