Interest and Dividends
In order to reflect the trading practices of a live market, interest and dividend adjustments are made, where necessary, to the trader’s account by the CFD company.
These adjustments differ depending on whether the trader has decided to go long or if he has decided to short.
For example, when a long CFD position is open, the CFD company debits interest from the account and credits any dividends which may be applicable.
When a short CFD position is open, the trader’s account is credited with interest and debited for dividends.
The interest adjustment calculation occurs each day based on the closing buy price of the share. This total interest payment is usually credited to your account on a weekly basis and is based on LIBOR.
The daily interest calculation is as follows:
Closing price of share that day x number of shares x interest rate ÷ number of days in year.
If the CFD position is open at the time of an ex-dividend date, the dividend will be calculated as follows: Number of shares x net dividend per share.
Interest adjustments are a certainty during the process of the trade, whereas dividend adjustments will only be made if, when trading on equities, the company whose shares are being traded pays out to shareholders from its post-tax profits
