Example - Index Trading
We wish to take a Short position on the Dow Jones Index in anticipation of a fall in price:
| Contract for Difference | |
|---|---|
| Bid Price | 11,000 |
| Offer Price | 11,004 |
| Number of Contract | 50 |
| Size of Exposure | $50 per point |
| Value of
Contract Margin Required |
$11,000 x 50 CFDs =
$550,000 $5,500 |
| Commission | $40 round trip trade (Buy or Sell or vice versa) |
Closing Price |
Index falls
down by 25 points 10,975 |
| Difference | 11,000 - 10,975 = 25 |
| Profit on Trade | $1250 (25 points @ 50*) - Commission = $1210 |
View the same example with Interest
The interest expense of your position is calculated daily, by applying the applicable interest rate to the closing value of the position. In this example, the applicable interest rate is 1.00% p.a. based on the Federal Funds Effective Rate (FFER) rate of 3.00% minus a margin of 2.0%. Therefore, assuming DJIA closed at 10.075 the interest expense for that day would be 10,075 x 3.00% / 360 = $ 14.51. This is for 50 CFD’s.
| Contract for Difference | |
|---|---|
| Bid Price | 11,000 |
| Offer Price | 11,004 |
| Number of Contract | 50 |
| Size of Exposure | $50 per point |
| Value of
Contract Margin Required |
$11,000 x 50 CFDs =
$550,000 $5,500 |
| Commission | $40 round trip trade (Buy or Sell or vice versa) |
| Closing
Price Interest Credited Position Closing Price |
10,090 $504,450 (10,090 x 50) x 1% / 360 = $14.00 Index falls down by 25 points 10,975 |
| Difference | 11,000 - 10,975 = 25 |
| Total Net Profit on Trade | $1250 (25 x 50) - Commission + Interest Credited ($14.00 x 2 = $28.00) = $1278.00 |