Contracts for Difference

Advantages
Margin Trading
Characteristics
Example A - Long CFD
Example B - Short CFD

Margin Trading

CFDs require an initial deposit of money as 'margin' to enable a position to be opened. The value of this position can be up to 10 times the value of your deposit, depending on the specific security traded.

For example, if you purchased 25,000 shares in a FTSE 100 listed company at £1.00, a simple equity trade would require you to deliver £25,000 plus costs. An equivalent CFD trade only requires a deposit of £2,500 (assuming a 10% initial margin requirement) plus costs.

A CFD is a high-risk, contingent liability transaction i.e. one in which you are at risk by more than your initial deposit. For this reason you will be required to keep a minimum of 10% margin on your account at all times, calculated as a percentage of the current value of the underlying securities. Should the price of the underlying securities start to move against you, you may be required to make further payments into your account.

If the margin on your account falls below the mandatory level, you will receive a "margin call" requiring you to deposit additional funds to bring your account back up to the required level. If you fail to deliver the necessary funds by the following business day, we have the discretion to close out your position(s).