Contract for difference - Revision history

Lancenicolase: /* External links */

2010-08-17T21:24:07Z

External links

←Older revision		Revision as of 21:24, 17 August 2010
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	==External links==		==External links==
-	http://www.contracts-for-difference.com

	[[Category:Derivatives]]		[[Category:Derivatives]]
	[[Category:Instruments]]		[[Category:Instruments]]

Luckystrike23: /* External links */

2008-08-16T09:37:58Z

External links

←Older revision		Revision as of 09:37, 16 August 2008
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	==External links==		==External links==
-		+	http://www.contracts-for-difference.com

	[[Category:Derivatives]]		[[Category:Derivatives]]
	[[Category:Instruments]]		[[Category:Instruments]]

Rhody Trader at 22:43, 30 August 2005

2005-08-30T22:43:41Z

←Older revision		Revision as of 22:43, 30 August 2005
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	==External links==		==External links==
		+

	[[Category:Derivatives]]		[[Category:Derivatives]]
	[[Category:Instruments]]		[[Category:Instruments]]

Rhody Trader at 22:43, 30 August 2005

2005-08-30T22:43:12Z

←Older revision		Revision as of 22:43, 30 August 2005
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	==See also==		==See also==
		+

	==T2W links==		==T2W links==

Rhody Trader at 22:42, 30 August 2005

2005-08-30T22:42:36Z

←Older revision		Revision as of 22:42, 30 August 2005
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-	{{Glossary\|An agreement between two parties to settle, at the close of the contract, the difference between the opening and closing prices of the contract, multiplied by the number of [[underlying]] units (e.g [[stock\|shares]]) specified in the contract.}}	+	{{Glossary\|An agreement between two parties to settle, at a predetermined date/time, the difference between the opening and closing prices of the contract, multiplied by the number of [[underlying]] units (e.g [[stock\|shares]]) specified in the contract.}}

-	Contracts for Difference (CFDs) are [[derivative]]s traded in a similar way to ordinary shares; however CFDs are traded principal-to-principal with no centralised market quote. As such, they are deemed to be off-[[exchange]] or [[over-the-counter]] (OTC) products and are not specifically covered by any stock exchange rules. The prices quoted by many CFD providers is the same as the underlying market price and the you can trade in any quantity just as you would with an ordinary share. You will usually be charged a commission on the trade and the total value of the transaction is simply the number of CFDs bought or sold multiplied by the market price. However, there are some distinct differences from trading ordinary shares that have made them increasingly popular as an alternative instrument to speculate on the movements of shares or indices.	+	Contracts for Difference (CFDs) are [[derivative]]s traded in a similar way to ordinary shares; however CFDs are traded principal-to-principal with no centralised market quote. As such, they are deemed to be off-[[exchange]] or [[over-the-counter]] (OTC) products and are not specifically covered by any stock exchange rules. The prices quoted by many CFD providers are the same as the underlying market price and you can trade in any quantity just as you would with an ordinary share. You will usually be charged a [[commission]] on the trade and the total value of the transaction is simply the number of CFDs bought or sold multiplied by the market price. However, there are some distinct differences from trading ordinary shares that have made them increasingly popular as an alternative instrument to speculate on the movements of shares or indices.

	==Key Features==		==Key Features==
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	'''Traded on margin'''		'''Traded on margin'''

-	Rather than pay the full value of a transaction you only need to pay a percentage when opening the position called initial margin. The key point is that margin allows leverage, so that you can access a larger amount of shares than you would be able to if buying or selling the shares themselves.	+	Rather than pay the full value of a transaction you only need to pay a percentage when opening the position called initial [[margin]]. The key point is that margin allows [[leverage]], so that you can access a larger amount of shares than you would be able to if buying or selling the shares themselves.

-	The [[margin]] on all open positions must be maintained at the required level over and above any marked to market profits or losses in order keep the position open. This is known as maintenance margin. If a position moves against you and reduces your cash balance so that you are below the required margin level on a particular trade, you will be subject to a [[margin call]] and will have to pay additional money into your account to keep the position open or you may be forced to close your position.	+	The margin on all open positions must be maintained at the required level over and above any [[marked-to-market]] profits or losses in order keep the position open. This is known as [[maintenance margin]]. If a position moves against you and reduces your cash balance so that you are below the required margin level on a particular trade, you will be subject to a [[margin call]] and will have to pay additional money into your account to keep the position open or you may be forced to close your position.

	'''Trade in rising or falling markets'''		'''Trade in rising or falling markets'''

-	CFDs allow you to trade [[long]] or [[short]]. Shorting in the ordinary share market is almost impossible. With CFDs, however, you can go short as easily as you go long. Giving you the ability to profit even if a share price falls if you trade the right way.	+	CFDs allow you to trade [[long]] or [[short]]. Shorting in the ordinary share market can be difficult. With CFDs, however, you can go short as easily as you go long. Giving you the ability to profit even if a share price falls if you trade the right way.

	'''No stamp duty'''		'''No stamp duty'''
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	'''Overnight Financing'''		'''Overnight Financing'''

-	Because CFDs are traded on margin if you hold a position open overnight it will be subject to a finance charge. Long CFD positions are charged [[interest]] if they are held overnight, Short CFD positions will be paid interest.	+	Because CFDs are traded on margin if you hold a position open [[overnight position\|overnight]] it will be subject to a finance charge. Long CFD positions are charged [[interest]] if they are held overnight, Short CFD positions will be paid interest.

-	The rate of interest charged or paid will vary between different brokers and is usually set at a % above or below the current LIBOR (London Inter Bank Offered Rate).	+	The rate of interest charged or paid will vary between different [[broker]]s and is usually set at a % above or below the current LIBOR ([[London Inter Bank Offered Rate]]).

	The interest on position is calculated daily, by applying the applicable interest rate to the daily closing value of the position. The daily closing value is the number of shares multiplied by the closing price. Each day's interest calculation will be different unless there is no change at all in the share price.		The interest on position is calculated daily, by applying the applicable interest rate to the daily closing value of the position. The daily closing value is the number of shares multiplied by the closing price. Each day's interest calculation will be different unless there is no change at all in the share price.
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	==Advantages==		==Advantages==

-	*'''Margin''' - CFDs are traded on [[margin]] so you can maximise your trading capital	+	*'''Margin''' - CFDs are traded on margin so you can maximise your trading capital.

-	*'''Stamp duty''' - No [[stamp duty]] is payable (saving 0.5% compared to a traditional share purchase).	+	*'''Stamp duty''' - No stamp duty is payable (saving 0.5% compared to a traditional share purchase).

-	*'''Short trades''' - You can profit from falling or rising markets by trading long or short	+	*'''Short trades''' - You can profit from falling or rising markets by trading long or short.

	*'''Diversity''' - A single account can give you access to far greater range of financial markets.		*'''Diversity''' - A single account can give you access to far greater range of financial markets.

-	*'''Money management''' - You can limit & manage your risk using [[stop loss\|stop losses]] and [[limit order]]s.	+	*'''Money management''' - You can limit & manage your risk using stop losses and limit orders.

	*'''Regulation''' - CFDs are regulated in the UK by the [[Financial Services Authority]] (FSA) in accordance with the Financial Services and Markets Act 2000. All CFD transactions are reported daily to the FSA and regulated firms must have sufficient financial resources to support the volume of their CFD trading at all times.		*'''Regulation''' - CFDs are regulated in the UK by the [[Financial Services Authority]] (FSA) in accordance with the Financial Services and Markets Act 2000. All CFD transactions are reported daily to the FSA and regulated firms must have sufficient financial resources to support the volume of their CFD trading at all times.

-	*'''Dividends''' - Depending on your CFD broker you may be entitled to receive any dividends with the CFD you trade. This will apply if you qualify under the periods set by the underlying stock.	+	*'''Dividends''' - Depending on your CFD broker you may be entitled to receive any [[dividend]]s with the CFD you trade. This will apply if you qualify under the periods set by the underlying stock.

	==Disadvantages==		==Disadvantages==
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	*The geared nature if margin trading markets means that both profits and losses can be magnified and unless you place a stop loss you could incur very large losses if your position moves against you.		*The geared nature if margin trading markets means that both profits and losses can be magnified and unless you place a stop loss you could incur very large losses if your position moves against you.

-	*It is less suited to the long term investor, if you hold a CFD open over a long period of time the costs associated increase and it may be more beneficial to have bought the underlying asset.	+	*It is less suited to the long term [[investor]], if you hold a CFD open over a long period of time the costs associated increase and it may be more beneficial to have bought the underlying asset.

	*You have no rights as an investor, including no voting rights.		*You have no rights as an investor, including no voting rights.
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	'''Pairs Trading'''		'''Pairs Trading'''

-	If you believe that one company is undervalued compared to another company (e.g. Barclays against Lloyds) you can use CFDs to go long on the cheaper stock whilst going short the more expensive stock.	+	If you believe that one company is [[undervalued]] compared to another company (e.g. Barclays against Lloyds) you can use CFDs to go long on the cheaper stock whilst going short the more expensive stock.

	'''Tax Efficient Trading'''		'''Tax Efficient Trading'''

-	If you have a holding of physical shares you can sell CFDs against this without crystallising a potentially taxable capital gain. This enables you to control the time at which you realise capital gains or losses and may reduce your tax liability.	+	If you have a holding of physical shares you can sell CFDs against this without crystallising a potentially taxable [[capital gain]]. This enables you to control the time at which you realise capital gains or losses and may reduce your tax liability.

-	==Related T2W Resources==	+	==See also==
		+
		+	==T2W links==

	*[[T2WForum:98\|CFDs Forum]]		*[[T2WForum:98\|CFDs Forum]]
	*[[T2WKLab:cfds\|Knowledge Lab]]		*[[T2WKLab:cfds\|Knowledge Lab]]
		+
		+	==External links==

	[[Category:Derivatives]]		[[Category:Derivatives]]
	[[Category:Instruments]]		[[Category:Instruments]]

Rhody Trader at 12:23, 1 August 2005

2005-08-01T12:23:43Z

←Older revision		Revision as of 12:23, 1 August 2005
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-	A contract for difference (CFD) is an agreement between two parties to settle, at the close of the contract, the difference between the opening and closing prices of the contract, multiplied by the number of [[underlying]] units (e.g [[stock\|shares]]) specified in the contract.	+	{{Glossary\|An agreement between two parties to settle, at the close of the contract, the difference between the opening and closing prices of the contract, multiplied by the number of [[underlying]] units (e.g [[stock\|shares]]) specified in the contract.}}

-	CFDs are [[derivative]]s traded in a similar way to ordinary shares; however CFDs are traded principal-to-principal with no centralised market quote. As such, they are deemed to be off-[[exchange]] or [[over-the-counter]] (OTC) products and are not specifically covered by any stock exchange rules. The prices quoted by many CFD providers is the same as the underlying market price and the you can trade in any quantity just as you would with an ordinary share. You will usually be charged a commission on the trade and the total value of the transaction is simply the number of CFDs bought or sold multiplied by the market price. However, there are some distinct differences from trading ordinary shares that have made them increasingly popular as an alternative instrument to speculate on the movements of shares or indices.	+	Contracts for Difference (CFDs) are [[derivative]]s traded in a similar way to ordinary shares; however CFDs are traded principal-to-principal with no centralised market quote. As such, they are deemed to be off-[[exchange]] or [[over-the-counter]] (OTC) products and are not specifically covered by any stock exchange rules. The prices quoted by many CFD providers is the same as the underlying market price and the you can trade in any quantity just as you would with an ordinary share. You will usually be charged a commission on the trade and the total value of the transaction is simply the number of CFDs bought or sold multiplied by the market price. However, there are some distinct differences from trading ordinary shares that have made them increasingly popular as an alternative instrument to speculate on the movements of shares or indices.

	==Key Features==		==Key Features==

techst@: /* Advantages */

2005-07-24T18:56:23Z

Advantages

←Older revision		Revision as of 18:56, 24 July 2005
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	*'''Regulation''' - CFDs are regulated in the UK by the [[Financial Services Authority]] (FSA) in accordance with the Financial Services and Markets Act 2000. All CFD transactions are reported daily to the FSA and regulated firms must have sufficient financial resources to support the volume of their CFD trading at all times.		*'''Regulation''' - CFDs are regulated in the UK by the [[Financial Services Authority]] (FSA) in accordance with the Financial Services and Markets Act 2000. All CFD transactions are reported daily to the FSA and regulated firms must have sufficient financial resources to support the volume of their CFD trading at all times.
		+
		+	*'''Dividends''' - Depending on your CFD broker you may be entitled to receive any dividends with the CFD you trade. This will apply if you qualify under the periods set by the underlying stock.

	==Disadvantages==		==Disadvantages==

Rhody Trader: /* Related T2W Resources */

2005-07-08T10:54:45Z

Related T2W Resources

←Older revision		Revision as of 10:54, 8 July 2005
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	==Related T2W Resources==		==Related T2W Resources==

-	* [http://www.trade2win.com/resources/booksoverview.php Book Listing]	+	*[[T2WForum:98\|CFDs Forum]]
-	* [http://www.trade2win.com/reviews/?catid=1 Software Reviews]	+	*[[T2WKLab:cfds\|Knowledge Lab]]
-	* [http://www.trade2win.com/boards/forumdisplay.php?f=98 Forum]	+
-	* [http://www.trade2win.com/knowledge/cfds Knowledge Lab]	+

	[[Category:Derivatives]]		[[Category:Derivatives]]
	[[Category:Instruments]]		[[Category:Instruments]]

Sharky: /* Advantages */

2005-07-07T10:46:23Z

Advantages

←Older revision		Revision as of 10:46, 7 July 2005
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	==Advantages==		==Advantages==

-	*Contracts For Difference (CFDs) are traded on [[margin]] so you can maximise your trading capital	+	*'''Margin''' - CFDs are traded on [[margin]] so you can maximise your trading capital

-	*No [[stamp duty]] is payable (saving 0.5% compared to a traditional share purchase).	+	*'''Stamp duty''' - No [[stamp duty]] is payable (saving 0.5% compared to a traditional share purchase).

-	*You can profit from falling or rising markets by trading long or short	+	*'''Short trades''' - You can profit from falling or rising markets by trading long or short

-	*A single account can give you access to far greater range of financial markets.	+	*'''Diversity''' - A single account can give you access to far greater range of financial markets.

-	*You can limit & manage your risk using [[stop loss\|stop losses]] and [[limit order]]s.	+	*'''Money management''' - You can limit & manage your risk using [[stop loss\|stop losses]] and [[limit order]]s.

-	*CFDs are regulated in the UK by the [[Financial Services Authority]] (FSA) in accordance with the Financial Services and Markets Act 2000. All CFD transactions are reported daily to the FSA and regulated firms must have sufficient financial resources to support the volume of their CFD trading at all times.	+	*'''Regulation''' - CFDs are regulated in the UK by the [[Financial Services Authority]] (FSA) in accordance with the Financial Services and Markets Act 2000. All CFD transactions are reported daily to the FSA and regulated firms must have sufficient financial resources to support the volume of their CFD trading at all times.

	==Disadvantages==		==Disadvantages==

frugi at 14:27, 4 July 2005

2005-07-04T14:27:19Z

←Older revision		Revision as of 14:27, 4 July 2005
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	A contract for difference (CFD) is an agreement between two parties to settle, at the close of the contract, the difference between the opening and closing prices of the contract, multiplied by the number of [[underlying]] units (e.g [[stock\|shares]]) specified in the contract.		A contract for difference (CFD) is an agreement between two parties to settle, at the close of the contract, the difference between the opening and closing prices of the contract, multiplied by the number of [[underlying]] units (e.g [[stock\|shares]]) specified in the contract.

-	CFDs are traded in a similar way to ordinary shares. The prices quoted by many CFD providers is the same as the underlying market price and the you can trade in any quantity just as you would with an ordinary share, you will usually be charge a commission on the trade and the total value of the transaction is simply the number of CFDs bought or sold multiplied by the market price. However, there are some distinct differences from trading ordinary shares that have made them increasingly popular as an alternative instrument to speculate on the movements of shares or indices.	+	CFDs are [[derivative]]s traded in a similar way to ordinary shares; however CFDs are traded principal-to-principal with no centralised market quote. As such, they are deemed to be off-[[exchange]] or [[over-the-counter]] (OTC) products and are not specifically covered by any stock exchange rules. The prices quoted by many CFD providers is the same as the underlying market price and the you can trade in any quantity just as you would with an ordinary share. You will usually be charged a commission on the trade and the total value of the transaction is simply the number of CFDs bought or sold multiplied by the market price. However, there are some distinct differences from trading ordinary shares that have made them increasingly popular as an alternative instrument to speculate on the movements of shares or indices.

	==Key Features==		==Key Features==
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	*You can limit & manage your risk using [[stop loss\|stop losses]] and [[limit order]]s.		*You can limit & manage your risk using [[stop loss\|stop losses]] and [[limit order]]s.
		+
		+	*CFDs are regulated in the UK by the [[Financial Services Authority]] (FSA) in accordance with the Financial Services and Markets Act 2000. All CFD transactions are reported daily to the FSA and regulated firms must have sufficient financial resources to support the volume of their CFD trading at all times.

	==Disadvantages==		==Disadvantages==