What's the meaning of libor plus 3 percent?

aparoid89

Active member
146 1
For overnight positions of a CFD it says that I pay a low libor + 3 percent. Does that mean if I hold a £1000 position then I have to pay over £30 a night. My plan was to do some long term trading, but that would be far too expensive.
 

new_trader

Legendary member
6,230 1,281
For overnight positions of a CFD it says that I pay a low libor + 3 percent. Does that mean if I hold a £1000 position then I have to pay over £30 a night. My plan was to do some long term trading, but that would be far too expensive.
No, I'm certain it is an annual calculation charged daily. CFD's are intended to replicate the performance of investing in the physical and the opportunity cost of doing so. If you invest £1000 in equities you gain (or lose) capital and you earn dividend income, however you 'lose' the interest you would have earned on the £1000 had you kept it in the bank. The cost of a CFD shouldn't be too much more than the loss of interest you would have earned with cash. This is the opposite of shorting a CFD, where you lose dividends but earn interest. It is the equivalent of receiving cash for the shares you sold and deposited it in the bank...more or less.
 

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