CFD TRADING EXAMPLES – HOW CFDs WORK
CFD EXAMPLE: BUYING VODAFONE
Assume you want to buy 1000 Vodafone CFDs and the exchange price stands at 214.9-215.0p. Your CFD position will be opened at the upper price of 215.0p. The full contract value of this position is 1000 x 215.0p or £2150, but to open the contract you need only put down a margin deposit.
Your commission to open this position will be 0.1% x £2150 = £2.15.
|No. of CFDs||1000|
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 market price now stands at 233.3-233.4p. You can now close your CFD position by selling at the bid price of 233.3p. Your commission to close this position will be 0.1% x £2333 = £2.33.
To calculate your net profit you should add or subtract any overnight financing and dividend adjustments, and subtract your total commission paid.
CFD EXAMPLE: SELLING WALL STREET
Suppose you want to go short of Wall Street. Our quote for the cash index has a minimum dealing spread of 1.6 points and might be 22263.0-22264.6. This means that you can sell at 19763.0, 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 22263.0.
|Risk per point||$3|
Assume our Wall Street price falls to 22137.4-22139.0 and you decide to close your CFD position by buying at the ask price. On indices there is no commission to pay as our charge is incorporated in the spread. 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.
For more detail on margin calculations, and further examples, visit our FAQs. You can discover more about CFD trading in several ways: