CFD Example
A Long Trade
Below is an example of an opening trade in Reuters. The first investor is buying traditional shares, the second is using CFD's.
Trade 1: Result Profit
| Opening Trade |
Buying Shares |
Buying a CFD |
| Price of Reuters |
500p |
500p |
| Number of Shares |
2,000 |
2,000 |
| Value of Position |
£10,000 |
£10,000 |
| Stamp Duty (0.5%) |
£50 |
NIL |
| Commission |
£100 (1%) |
£50 (0.5%) |
| Deposit Required |
£5,000 |
£500 |
After 5 days both investors sell their Reuters shares and make a profit.
| Closing Trade |
Selling Shares |
Selling a CFD |
| Price of Reuters |
515p |
515p |
| Number of Shares |
2,000 |
2,000 |
| Value of Position |
£10,300 |
£10,300 |
| Commission |
£103 |
£51.50 |
| Financing Charges * |
NIL |
£12 |
| Net Profit |
£50 |
£188 |
| Return on Equity |
0.50% |
37.60% |
Trade 2: Result Loss
| Opening Trade |
Buying Shares |
Buying a CFD |
| Price of Reuters |
500p |
500p |
| Number of Shares |
2,000 |
2,000 |
| Value of Position |
£10,000 |
£10,000 |
| Stamp Duty (0.5%) |
£50 |
NIL |
| Commission |
£100 (1%) |
£50 (0.5%) |
| Deposit Required |
£5,000 |
£500 |
After 5 days both investors sell their Reuters shares and make a profit.
| Closing Trade |
Selling Shares |
Selling a CFD |
| Price of Reuters |
490p |
490p |
| Number of Shares |
2,000 |
2,000 |
| Value of Position |
£9,800 |
£9,800 |
| Commission |
£98 |
£49 |
| Financing Charges * |
NIL |
£12 |
| Net Loss |
£448 |
£311 |
| Return on Equity |
-4.48% |
-62.20% |
* position held over 5 nights
The CFD investor has paid a standard financing charge of £12 for holding the position. Interest is charged on an overnight basis: £10,000 x 6% (LIBOR + 2.75%) over 5 days = £12. Commission is charged as a percentage of the total value of a trade.
If the CFD investor takes a short position, they will receive interest in a similar fashion based on LIBOR -2.75%.
