 |
 CFD's are one of the most flexible and cost
effective ways to trade the worlds Equity Markets. |
| You can take both long and short CFD positions with equal ease. If you go long of a CFD, you benefit from a rise in the underlying reference share price, and lose if the underlying reference share price falls. Conversely, if you take out a short CFD, you profit from a fall in the underlying reference share price rises. |
| You do not pay the full underlying value of the CFD trades. However before you trade, you are required to deposit collateral, known as initial margin. Initial margin rates are then applied to each trade. These are calculate as a percentage of the overall value of the trade, typically between 5% and 20% depending on the stock or indices traded. |
| If all your trades were eligible for a 10% margin, you could hold positions worth a total of £100,000, having deposited only £10,000 with us. You would therefore be gaining ten times leverage on the collateral you provided. |
| The value of any running losses must be met daily. This may result in you being called for additional funds to support a position. This is known as a variation margin. |
You wish to buy Ten Thousand shares at 121p |
The share has a 5% margin requirement |
10,000 x 121 = 12,200 (this is your total market exposure) |
12100 x 5% = £605 |
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| To open this position you be required to deposit £605 as initial Margin |
| Under current UK tax legislation, CFD's are not liable to Stamp Duty or Stamp Duty Reserve Tax (SDRT). Stamp Duty/SDRT is currently applied to UK share purchases at 0.5%* |
You may have an investment portfolio which includes shares that you wish to hold for the medium to long term. However, there will almost certainly be occasions when you feel some of these shares may fall in the short term. It is a very costly exercise to sell those shares and then buy them back once the market has corrected. Going short of a CFD is a much more cost-efficient method of taking advantage of shares which are perceived to be overvalued.
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