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CFDs - Examples (Page 3 of 3)
Summary:
CFDs are not hard to understand if you break the trade down into its individual parts. Here are 2 simple examples of a long and short stockmarket trade. |
A Long CFD Position - Vodafone
- The trader is a short term buyer of Vodafone, expecting the stock to move up sharply over a week
- The buys 10,000 shares of Vodafone at £1.20 using a CFD
- The trade was done on a Monday and the shares sold that Friday at £1.30
Note: For both of the following transactions LIBOR is at 5% and the broker pays/receives interest at 2% over/under LIBOR.
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CFD - LONG POSITION (Bullish Trade)
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| Buy 10,000 Vodafone shares using CFDs at £1.20 |
£12,000
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| 10% cash deposit (refundable) |
£1,200
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| Commission at 0.25% (to open) |
(£30)
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| Financing (5 days at £2.30 per day) |
(£11.50)
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| 10,000 Vodafone shares sold at £1.30 - Profit |
£1,200
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| Commission at 0.25% (to close) |
(£32.50)
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TOTAL PROFIT
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£1,126
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A Short CFD Position - HSBC
- A trader is bearish of HSBC, expecting the stock to decline over the short term
- He sells short 1,000 shares of HSBC at £7.50 using a CFD
- He buys back to cover the trade two weeks later at £7.00
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CFD - SHORT POSITION (Bearish Trade)
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| Sell short 1,000 HSBC shares using CFDs at £7.50 |
£7,500
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| 10% cash deposit (refundable) |
£750
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| Commission at 0.25% (to open) |
(£18.75)
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| Financing (14 days at £0.41 per day) - CREDIT |
£5.75
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| 1,000 HSBC shares bought back at £7.00 - Profit |
£500
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| Commission at 0.25% (to close) |
(£17.50)
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TOTAL PROFIT
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£469.50
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