WH Ireland CFDs
What are Contracts for difference (CFDs)?
A CFD is a geared product derived from an equity which allows a client to trade long or short of that equity to mirror the performance of the underlying share. Or to put it more simply a CFD is simply an agreement to exchange the difference in value of a particular share or market between the time at which the contract is opened and the time at which it is closed, without the requirement to own the physical asset.
CFD trading is very similar to normal share dealing. You deal at the cash price of the share, and pay a commission which is calculated as a percentage of the value of the transaction.
Holders of a long or short CFD position are required to deposit margin as collateral rather than pay the full underlying value of the stock. A CFD has no settlement date and is in theory an open-ended contract. However for all long contracts, a financing fee is charged, normally a spread over LIBOR. On short contracts the client will be entitled to the rebate
CFDs can be used in a variety of situations.
- To hedge against adverse movements for an existing portfolio
- Short term speculation
- Access to a wide range of investment markets
Advantages of CFDs
- CFDs are traded on margin, so you can take a position without having to pay the full value of the transaction
- Sometimes as little as 5% therefore maximising your trading capital
- No stamp duty is payable (saving 0.5% on traditional share purchase)
- The ability to go short. i.e. profit from a falling market as well as a rising market
- Risk protection using stop losses and limit orders
CFDs are a leveraged product and can result in losses that exceed your initial deposit. Trading CFDs will be classified as high risk and may not be suitable for everyone, please ensure that you fully understand the risks involved before using this investment tool.
If you have any questions or would like to discuss the matter further please contact the W H Ireland experienced team on the following number:
| Birmingham: |
0121 265 6310 – Nick Westell |
