CFD Trading
Try CFDs for yourself, risk free, using our simulator:
Glossary
LIBOR
The British Banking Association LIBOR is the most widely used benchmark or reference rate for short term interest rates. LIBOR stands for the London Inter Bank Offered Rate and is the rate of interest at which banks borrow funds from other banks in London.
Notional Value
As you don't buy the actual shares or index, the Margin Requirement is based on the Notional Value of the shares. For example, if an equity trades at 556 pence and you buy 1,000 CFDs based on it, the notional value would be £5,560.
Risk Warning:
Your investments and any income from CFDs can go down as well as up. You can quickly lose more than your initial deposit. Please make sure you understand the risks. CFDs may not be suitable for everyone.
Trade ‘short’ if you believe prices will fall
One of the best features of CFDs is that you can still make money even if you think a share price or index is going to fall by taking a short position. Going short means selling something at a high price, with a view to buying it back at a lower one and taking a profit.
Follow the example below, using an index, to see how it works:
| XYZ plc is currently trading at 825 pence per share, but you think the share price is going to fall so you sell 1000 XYZ plc CFDs | |
| Price of XYZ plc CFDs | 825 pence |
| Number of CFDs | 1,000 |
| Notional value of CFDs | £8, 250.00 |
| Commission @ 0.20% | £16.50 |
| Margin Requirement (10%) | £825.00 |
| Finance* | £0.51/day |
* When you are take a short position using a CFD we’ll pay you a daily financing rate based on Sterling LIBOR and the closing price of the share. So, to hold a short position overnight you might typically be paid LIBOR less 2.5%. Assuming LIBOR stands at 4.75% on a given day, the rate would be 2.25%
Financing is credited on the value of the holding of the underlying financial instrument, minus margin requirement.
What happens if the price falls?
| 3 days later XYZ plc share price drops to 750 pence, so you buy back the CFD and take your profits | |
| Price of XYZ plc CFDs | 750 pence |
| Number of CFDs | 1,000 |
| Commission @ 0.20% | £15.00 |
| Closing value | £7,500.00 |
| Opening value | £8,250.00 |
| Profit on trade | £750.00 |
| Total Commission | (£31.50) |
| 3 days financing @ £0.51 | (£1.53) |
| Overall profit on trade | £720.03 |
What happens if the price goes up?
| 3 days later XYZ plc share price goes up to 850 pence, so you buy back the CFD. | |
| Price of XYZ plc CFDs | 850 pence |
| Number of CFDs | 1,000 |
| Commission @ 0.20% | £17.00 |
| Closing value | £8,500.00 |
| Opening value | £8,250.00 |
| Loss on trade | (£250.00) |
| Total Commission | (£33.50) |
| 3 days financing @ £0.51 | (£1.53) |
| Overall loss on trade | £281.97 |
There’s no Stamp Duty to pay*
One of the major attractions of dealing in CFDs is that you don't pay UK Stamp Duty. Because you never actually own any shares, there's no 0.5% Stamp Duty when you buy. Of course you may still be liable for Capital Gains Tax and tax rules may change. If trading Irish Equity CFDs please refer to the Market Information Sheets for further information.
*please note that tax laws may change