CFDs - a worked example

Visit Save For Later

by Market Moves Staff

Posted

In this worked example we show how you could trade Vodafone with CFDs

Opening the position
It is the morning of 1 July 2009 and you decide to open a position on Vodafone. The stock is quoted at 126.85/126.95 in the market, and you buy 10,000 shares as a CFD at 126.95p, the offer price.

As a Trader Account holder instead of putting up the full value of the shares (126.95p x 10,000), you need only supply a deposit of 5% or £634.75.

Closing the position
It is near the end of the day, and Vodafone has risen to 129.25/129.35 in the market and you decide to take your profit. You sell 10,000 shares at 129.25p, the bid price.

Your profit on the trade is calculated as follows:

Profit on trade
Closing level 129.25p
Opening level 126.95p
Difference 2.30p
Profit on trade: 2.30p x 10,000 = £230

To calculate the overall result on the transaction you would also have to take into account the commission you have paid and the interest and dividend adjustments.

Of course, had the market moved in the opposite direction, you would have made a loss that may have exceeded your initial deposit.

This example is based on the Vodafone margin rate available to Trader Account holders.

For a free CFD demo trading account please visit IG Markets

Like Like

Contribute to this Story:

All CFDs News

Recent CFDs Articles

FTSE clears 6000 level as Year starts well2 Jan 2013
FTSE clears the 6000 level as the year starts on an optimistic note The UK’s FTSE 100 moved past the 6000 level for the first time since July 2011 on Wednesday.The move was mirrored over on mainland Europe with Germany’s Dax climbing 1.95% and France’s Cac 40 adding 2%. Boosting investor’s a...
Optimism abounds after positive US retail sales and eurozone talks14 Oct 2011
Retail sales in the US climbed 1.1% in September from August according to data from the US Commerce Department. This is the biggest jump in retail sales seen for seven months and it’s helped the Dow Jones to add 100 points today already. Optimism has been growing surrounding the future ...
FTSE falls below 5000 but bounces back19 Aug 2011
The UK’s FTSE 100 plummeted below the 5000 mark on Friday morning as fears of a double-dip recession in the US and across the EU continued to dominate investor sentiment. It made a recovery though to trade up 14 points at 3.45 pm (London time), helped by a rally in mining shares chiefly gold a...
Strong Corporate Earnings Continue In Weak Global Economic Conditions22 Oct 2010
UK markets might have been overshadowed by the Compreshensive Spending Review (CSR) this week but they were certainly not bowed by it. The FTSE 100, after recording day losses on Thursday and Friday, gained 39 points Monday on the back of strong performances from energy companies BP, who had sugge...
US non-farm figures inconclusive – further QE imminent?8 Oct 2010
The expectation but not yet the realisation of further economic stimulus in the US has excited investors this week. And with the US job figures coming in flat, we can expect the argument for more stimulus to gain increasing credibility. Despite an unspectacular final week, September turned ou...
IGMarkets' Friday evening wrap11 Jun 2010
Following the disappointing non-farm figures it’s been an edgy week for equities with the common theme being volatility.Any rally has been swiftly followed by nervous traders cashing in their chips wary of just where the growth in consumer spending and trade needed to stimulate the global economy i...
Share Contracts For Difference - Advantages29 Mar 2010
Share CFDs through IG Markets are ideal for taking a view on individual equities. CFDs (Contracts For Difference) have grown rapidly into a major force in share trading Here are some of the benefits of trading CFDs GearingCFD traders can gain exposure to a large amount of stock with only a fra...
Why Trade CFDs29 Mar 2010
CFDs are a versatile trading vehicle, giving you access to share price movements without having to own the underlying shares. At firms like IG Markets you can also trade forex, stock indices and many other markets on margin. All on one trading account. Benefits of CFD trading include: Easy to...
New $1 Australia 200 Micro Contract14 Jul 2009
New $1 Australia 200 Micro Contract IG Markets is pleased to announce the new $1 micro contract on the Australia 200 index, which makes taking a view on the overall market easy! With market sentiment shifting from one moment to the next, you can avoid the uncertainty affecting individual sto...

Recent Articles

EUR/USD update (22nd May 2013, 13:30)22 May 2013
The euro is higher versus the US dollar ahead of this afternoon's statement from US Federal Reserve chairman Ben Bernanke. The euro is trading at $1.2928, up 0.18%, as traders wait to hear from Mr Bernanke at 3pm (London time). Lately, there has been talk that the Fed is considering reducing the si...
Market Comment 22nd May 201322 May 2013
European equity markets look set to open marginally lower after what was another strong day for equities on Tuesday. In what was a quiet day with no major economic data of note in the US, comments made by more Fed presidents proved to be the drivers for markets, again. This time QE was in fav...
EUR/USD update (22nd May 2013, 06:00)22 May 2013
The USD was back in focus as more Fed members hit the wires ahead of tomorrow’s FOMC meeting minutes and Fed Chief Ben Bernanke’s testimony. Overnight we heard from Fed members Mr Bullard and Mr Dudley. Mr Bullard was quite dovish, highlighting that low inflation makes it hard to make a case for ta...
EUR/USD update (21st May 2013, 12:00)21 May 2013
Ahead of tomorrow’s important speech from US Federal Reserve chairman Ben Bernanke, EUR/USD is a touch lower. Speculation around the City at the tail-end of last week revolved around the Fed beginning to reduce its quantitative easing measures. Tomorrow Ben Bernanke is unlikely to announce that the...
Market Comment 21st May 201321 May 2013
European equities look set to open a few points lower as fear of a QE slow-down ensues. Across the pond yesterday various Fed Presidents gave their views on quantative easing. Hints that the Fed may ease back on its bond-buying program eradicated any gains made previously in the equity markets. Spe...
EUR/USD update (21st May 2013, 06:00)21 May 2013
The US dollar lost some steam as investors continue the QE repricing cycle on the back of some mixed comments by various Fed members. The fall in the USD was mostly blamed on stimulus uncertainty after Chicago Fed President Evans was on the wires with a fairly dovish statement. Mr Evans said ...
EUR/USD update (20th May 2013, 13:00)20 May 2013
The euro is higher versus the US dollar today as dealers close out their short positions. The euro is trading at $1.2863 today, up 0.2%, as traders are buying back into the currency in order to lock in their profits on short trades. The euro has come down 3% versus the dollar since the beginning of...
Market Comment 20th May 201320 May 2013
European equities are set to open marginally lower this morning, despite strong gains being seen across Asia. Life is getting harder for market commentators – as there is a finite amount of ways of writing the same piece of news. In case you weren’t aware of the continuing theme in 2013, the US had...
EUR/USD update (20th May 2013, 06:00)20 May 2013
Strength in the greenback was triggered by a better-than-expected consumer confidence reading, which showed the strongest print since July 2007. The move higher in the USD weighed on the risk FX space, as EUR/USD lost ground. The pair dipped just below $1.28 on Friday, but has since managed t...