CFD Trading Examples
With CFDs, you don’t actually buy the asset you’re trading in, yet you can still gain if the market moves in your favour. You also need to be aware that you can also lose if the market moves against you.
CFD trading example: Company ABC share CFDs
- Company ABC’s shares are trading at 325.9/326p (bid/offer) in the market.
- You think Company ABC’s shares will rise over the coming weeks and you buy (go long) 10,000 CFDs of Company ABC based on a buy price of 326p.
- Commission cost to open charged at a rate of 0.15% - £48.90
|Therefore the sell price is:||330.9p|
|Sell 10,000 CFDs at 330.9p||£33090 (10,000 x 330.9p)|
|Less commission||£49.64 (£33090 x 0.15%)|
No Stamp Duty to pay on the buy as you are speculating and not owning the underlying asset therefore saving £163.00 in additional costs.
Let’s now look at would have happened if you were incorrect and the prices moved against you.
If Company ABC’s shares fell from the opening buy price of 326p to 321p, this would be a movement of 5p against the direction that you had predicted.
|Therefore the sell price is:||321p
|Sell 10,000 CFDs at 321p||32100 (10,000 x 321p)
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