Need more details ?

Call us : 0356 803 015

 
 

CFD-uri

You are here : Homepage»CFDs
 

A contract for difference (or CFD) is a contract between two parties, the seller and the buyer, which stipulates that the seller shall pay the buyer the difference between the current value of an asset and its value from the time contract. (If the difference is negative, then the buyer pays instead of to the seller). The contracts for differences allow investors to take positions long (if relying on increase ) or short (if the investor foresees a quotation in decrease), and unlike futures contracts, they have no expiring date or size of the contract established. The contracts are performed based on a "lever effect" with margins, usually from 1% to 30% from the national value of the leading CFD for shares.

 

Brief history

CFD-s were initially developed in the early 90's in London. Being based on the equivalence of the support asset. They had an additional advantage, that of being transacted in margin. Moreover, they were exempted from the stamp tax, a tax applied in Great Britain in that period.

They have been initially used by hedge - funds and the institutional investors for covering their exposure over the shares in the London Stock Exchange at a very low cost.

Toward the end of the 90's, the CDFs have been introduced for the small investors, being popularized by a series of British companies by using an on-line transacting platform which facilitated the easy monitoring of the prices and transactions, in real time, by the investors.

 

Types of CFDs

A CFD can be created, theoretically, having as support the price of any asset. However, there are many assets which are too difficult or too costly to evaluate and/or do not move rapidly enough in order to be viable from the financial point of view, reason for which most CFD suppliers provide a standard set of instruments which can be transacted.

 

The main assets support for CFDs

Shares

CFDs having shares as support are CFDs whose role is to monitor the price of the share it monitors.

Cele mai frecvente piete in cadrul carora brokerii permit tranzactionarea de CFD-uri sunt NASDAQ, NYSE, LSE, ASX, TSE.

One of the positive aspects of CFDs is that you can short as easily as you can long, that is you can benefit both from the increase, and from the decrease.

The contracts are subject to a daily financial tax usually applied in correlation with LIBOR or another benchmark of the interest rate. The parties of a CFD pay in order to finance their positions long and can receive financing on the positions short. Example: if you have long CFD on EUR/JPY, you will pay for Euro and you will receive money for yens. The contracts are finalized by cashing or payment of the difference resulting from the opening price and the closing price of the position.

Usually, CFDs are subject to commissions which represent a certain percentage from the value of the position for each transaction.

The CFDs investors must keep a certain margin which usually varies between 1 and 30 per cent. One of the advantages of CFDs investors is that they need not deposit the entire notional value of the CFD and thus a given initial capital can control a bigger position, thus enhancing the profit or the potential loss. On the other hand, however, detaining a position in margin on a volatile CFD can expose the buyer to an appeal to the margin if the trend changes from an increasing one into a bearish type one, which often leads to substantial losses.

As in the case of other products which are transacted in the margin, the maximum exposure is not limited to the value of the initial investment. These risks are usuallyattenuated by using stop loss and other risk reduction strategies.


Indexes

CFDs per indexes are CFDs which pursue the correlation with the price of the index which they have as support. The indexes derive from a shares basket, shares chosen from a single stock exchange or several stock exchanges.

By using these CFDs one can very easily transact almost all the indexes on the international markets. The alternative would have been purchasing the shares in the weight in which they are included in the respective indexes, a process which is far more difficult, sometimes more costly and more complicated.

The main indexes offered by the CFDs brokers for transacting are:

  • The Dow Jones Industrial Average
  • The S&P 500 Index
  • The British FTSE 100
  • The Australian ASX S&P 200
  • The German DAX
  • The Japanese Nikkei 225
  • The Hong Kong Hang Seng Index
  • The British FTSE 100
  • The Australian ASX S&P 200
  • The Japanese Nikkei 225
  • The Hong Kong Hang Seng Index
 

AFind out more details regarding ::


CFDs transactionsDues and commissionsOpen account