Spreads & CFD’s

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Trading leveraged trading products carries a high level of risk.


CFD’s, Spread Bets and Spread Trades are leveraged products which allow you to take a position by depositing a small percentage of the notional value of your trade. As you can go long or short on any market these dealing products give you the ability to profit irrespective of whether the markets are rising or falling; this provides trading opportunities during volatile market conditions.

All these dealing products are leveraged so it is possible to lose more than you initial deposit.

CFDs


The term 'CFD' stands for Contract for Difference. This is a contract between you and Capital Index to exchange the difference in value of a financial instrument between the price at which the contract is opened and the price it is closed.

A CFD contract requires only a small percentage of the notional trade size to establish the position. A complete list of our products, markets and margin requirements can be found here.

Trade Examples: Spread Trade


Buying the UK 100

In this example, the UK 100 is trading at 6775.7 / 6776.7

You buy £1 per point at 6776.7 because you think the price of the UK 100 will go up. Your account has leverage of 100:1 so you need to deposit 1% of the total notional value as margin. Therefore, in this example your margin will be £67.76 (1% x (£1 x 6776.7)).

If the price moves down to 6754.4 your P/L will be -£22.30 and conversely if the price trades up to 6786.1 your P/L will be £10. The P/L will be realised once the trade has been closed

6754.4 - 6776.7 = -22.30

6786.7 - 6776.7=10

Trade Examples: Forex CFD


Selling EUR/USD

Opening the position

You decide to go short of the euro against the dollar. The quote is 1.3742/1.3743, and you sell 2 mini lots (the equivalent of €20,000) at 1.3742.

As the notional value of your position is €20,000 to open the trade you must deposit margin of 1% of the notional value. Your margin requirement is therefore 1% x €20,000 = €200.

Closing the position

Later EUR/USD has fallen to 1.3676/1.3677, and you take your profit by buying 2 mini lots at 1.3677. Your profit on the trade (in USD) is calculated as follows:

Opening level: € 20,000 (2 mini lots) x 1.3742 $27,484

Closing level: € 20,000 (2 mini lots) x 1.3677 $27,354

Profit on trade ($27,484 - $27,354) = $ 130

Of course had EUR/USD risen to 1.3810/1.3811 and you decide to close the trade you would need to buy back 2 mini lots paying 1.3766 which would result in a loss

Opening Level: €20,000 (2 mini lots) x 1.3742 = $27,484

Closing level: €20,000 (2 mini lots) x 1.3811 = $27,622

Loss on trade ($27,484 - $27,622) = -$138

Interest adjustments Currency Pairs


While the position remains open your account is debited or credited with the market swap rate +/- an administration charge. The swap rate expresses the cost of carry for the interest rate differential between the two currencies that have been traded past the contracts usual expiry date. This financing charge is often referred to as the ‘Roll-Over’. Capital Index performs its roll-over calculations each evening 17:00 ET (22:00 UK time).

Swap charges are released daily by the financial institutions we work with and are calculated based on risk-management analysis and market conditions. Each currency pair has its own swap charge and is measured on a standard size of 1.0 lot (100,000 base units).

Swap rates posted below are indicative rates and are subject to change based upon market volatility.

Example of roll-over

EURUSD


For example, if we have a 1 lot position, 100,000 EUR/USD at a rate of 1.36. The EUR daily rate of 0.05%, and the USD a daily rate of 0.01%.

The interest on the EUR is (100,000 * 0.05%) 5 EUR; the USD costs (136,000 * 0.01%) =13.6 USD. Converting the EUR to USD, 5 * 1.36 = USD 6.80. The net USD amount is 6.80 – 13.6 = - 6.8, which is divided by the 100,000 position. On a long EUR/USD position, the rollover costs 0.000068, or 0.68 pips and the admin charge of 0.75 means the total charge is 1.43

When is rollover booked?


22:00 UK Time is considered the beginning and end of the trading day. A position opened at 22:05 is not subject to rollover until the next day, while a position opened at 21:59 is subject to rollover at 22:00 UK Time.

Weekends


As the markets are closed on Saturdays and Sundays there is no rollover on these days but the banks still calculate interest on any position held over the weekend. To account for this procedure in the markets we offer we apply 3 days of rollover on Wednesday for currency pairs. For other products the 3 day roll will occur on Fridays.




Risk warning: Our service includes products that are traded on margin and carry a high level of risk. The products may not be suitable for all investors.
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