CFDs offer you the opportunity to profit from falling markets as easy as you can rising markets. You believe from your analysis that Anglo American may have reached a a high and believe the stock will come off.
Opening the position
Anglo American price 2378.4p
Sell Quantity 1000 shares
Ticket Value £23,784
Commission £35.68 (0.15%)
Funds to initate position
(5% of ticket value
+commission) £1224.88
Closing the position
To close the position you have to buy the same quantity as you have sold. This will take you to a zero position.
Anglo American price 2092.5p
Sell Quantity 1,000
Ticket Value £20,925
Commission £31.39
(0.15%)
CFD financing* £4.56
Total costs £71.63
Profit on trade £2782.81
Total Funds required £1189.2
*CFD Financing is the cost to trade on leverage on overnight positions. This is calculated at LIBOR + 3%. However, when you are shorting a position you are lending money Therefore wil be -3.
Therefore:
1,000 x 2378.4p x 1.75% (4.15%-3%)= £416.15 / 365 days = £1.14per night. The above trade was held for 4 nights therefore CFD financing comes in at £4.56.
If the position moves agianst you by rising and you do not have enough funds in your account then you would be required to meet your margin call. Therefore, it is possible to lose more than your initial outlay when trading CFDs and as such they are considered a high risk investment vehicle and are not suitable to all investors.
