A CFD is an agreement to exchange the difference between the buyer and the seller to exchange the difference between the entry and the exit price: for example, if you buy a CFD at £10 and then sell it at £12, you will receive a profit of £2 on your CFD trading account:
Instead, if you sell at £8, you will receive a loss of £2 on your CFD trading account.
CFD mirrors the price movements of the underlying asset.
However since you don't own the entire amount of the underlying, a share for example, you are required to deposit just the initial margin (a % of the CFD total value amount) to your CFD provider.
For example, if the CFD total value amount is £20.000 and the initial margin is 5%, you are allowed to trade up to 20 times your initial margin: in this case you will deposit £1.000 to trade up to £20.000.
Due to gearing (or leverage), these financial derivatives could cause losses above 100% of the initial margin.
If a CFD position is kept open for the following day, you can keep it position open indefinitely because a it is rolled forward every day, after the underlying trading hours closing.
Going Long and Going Short CFDs.
If you buy a CFD, you are taking advantage of the underlying financial asset up-move. In this case you pay a daily % of the yearly financing cost but you are receiving dividends, if paid.
If you are short of a CFD, you are taking advantage of the underlying financial asset down-move. In this case you receive a daily % of the yearly financing cost but you are losing dividends, if paid.
The Exchange accepts no responsibility for the content of the website you are now accessing or for any reliance placed by you or any person on the information contained on it.
By allowing this link the Exchange does not intend in any country, directly or indirectly, to solicit business or offer any securities to any person.
You will be redirected in five seconds.
You are accessing the London Stock Exchange Annual Report Service powered by PrecisionIR.
The Exchange accepts no responsibility for the content of the reports you are now accessing or for any reliance placed by you or any person on the information contained therein.
You will be redirected in five seconds