An Example of a Long CFD Trade
Example 1 - a long trade - Marks and Spencer
Jump to Example 2 - a short trade
You wish to buy 3,000 CFDs in Marks and Spencer:
| Bid/Offer: |
553/553.75p |
| Trade: |
Buy 3,000 CFDs at 553.75p |
| Margin Requirement: |
3,000 x £5.5375 x 10% = £1661.25 |
| Stamp Duty: |
None |
| Commission: |
£41.53 (0.25% of nominal) |
The financing of this position works as follows:
| Interest Rate: |
7% (3% above London Interbank Bid Rate (LIBID in this example = 4%)) |
| Closing Share Price: |
554p |
| Daily Interest owed: |
3,000 x £5.54 x 7% / 365 = £3.19 |
In the event of a benefit resulting from a Corporate Action, your account will be credited. In this example, Marks and
Spencer pay out a dividend:
| Dividend: |
Net 6p |
| Total Credit: |
£0.06 x 3000 = £180 |
10 days after opening the position, you decide to sell your CFD when the price of Marks and Spencer reaches 570p.
During this period your interest payments totalled £31.90. This will vary as daily interest is calculated on the value of the
position at the close of business. Your position is closed as follows:
| Bid/Offer: |
570/570.75p |
| Trade: |
Sell 3,000 CFDs at 570p |
| Commission: |
£42.75 (0.25% of nominal) |
The net result is as follows:
| Opening level: |
553.75p |
| Closing level: |
570p |
| Difference: |
16.25p |
| Profit on trade: |
£487.50 (£0.1625 x 3,000) |
| Total commission: |
£(84.28) |
| Dividend: |
£180 |
| Interest payments: |
(£31.90) |
| Net Profit: |
£551.32 |
N.B. Please note that you may not always make a profit and if the market moves against you you may be subject to losses
far in excess of your initial investment.
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