cfd

mmillar

Guest
330 5
That's interesting. I thought one of the major differences between CFDs and Spreadbetting was that you couldn't trade indices with CFDs. The link that Helen gave says that D4F are offering index CFDs. How long has this been happening? Anyone know what underlying instrument they are using?
 

CityTrader

Established member
665 26
Can't be bothered to read the link, so I apologise if this a rehash.
A contract For difference ( CFD) is effectively an artificial instrument. Most house ( GNI for example) will hedge their commitment against a CFD trade, by trading in the underlying instrument. ie. if Joeymugpboatpunter buys XYZ PLC on a CFD- then the issuer of that CFD will normally buy the equivalent ammount of share s ib XYZ PLC. Now it doesn't matter if this is an individual equity or an index. So theoretical risk ( and need to hedge apply)
As I understand it ( sure someone will correct me, if I'm wrong) but Deal4free work on the basis that most joeymugboatpunters lose money, therefore to take the risk of the other side of their trade must be profitable.

Hope that's (relatively) clear..
 
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