Opening a short CFD position
A trader wants to sell 5,000 shares of Company X as a CFD because he thinks the share price will fall.
The CFD company quote:
493 sell price
495 buy price
The margin in this example is 20%.
20% margin cost of 5,000 shares at sell price
493 493p x 5,000 = £24,650
20% of £24,650 = £4,930.
Commission 5,000 x 493 x 0.25% = 62
Total cost of opening CFD position: Margin cost £4,930 + commission £62 = £4,992
Closing and calculating overall result
In this example the CFD was open for 65 days, the interest paid = £185.00
The share has moved up in value against the trader's position. The trader decides to cut his losses and close the position at
518 sell price
520 buy price
He sells (opens cfd) at 493
He buys back (closes cfd) at 520
The difference is 27
The trader has lost 27p on each of the 5,000 shares 27p x 5,000 = £1,350.00.
Final calculation
Loss on trade £1,350
Sell commission £62
Buy commission £65
Total £1,477
Because £185 is paid in interest, the trader can take this away from the losses, so;
Total Loss = £1,292.00
