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What is a CFD?
A Contract for Difference is a product
traded on margin, which allows you to mirror the performance
of the underlying share (price, performance, dividends etc),
without the added cost of stamp duty.
In return, you pay only a financing cost
and basic commission rate.
Main Characteristics
Directional Trading:
Trading a CFD short is a convenient and cost effective
way of mirroring a potential fall in the underlying share.
Cost Effective:
No stamp duty is incurred when trading a CFD as you do not
physically buy the shares. Instead, you are issued with an
open-ended contract for the trade.
Open-Ended:
The long/short CFD position can be held indefinitely, as it
is an open-ended contract with no settlement date.
Geared:
Holders of a long/short CFD position need only deposit a 20%
margin as collateral, rather than pay the full underlying
value of the stock.
Benefits of Using CFDs
Professional
Trading: You may be able to take the opportunity to
sell a CFD short if you are the holder of the physical underlying
stock. This will hedge your risk against a short term correction
on the downside, as protection for your profits.
Equity Release:
If you wish to release funds tied up in Equities you can transfer
their position into a CFD, releasing 80% of funds which can
be used for reinvestment.
Financing:
Holding a long CFD position will make you liable to overnight
financing charges on the position spread over Libor, but you
will also receive interest on the margin held on deposit with
us. Going short on CFDs means you receive both interest on
the margin held with us, and finance on the position.
High business turnover:
It is easier to trade larger amounts, and more often, if you
do not have the capital layout, and Day Trading becomes much
more attractive without the added cost of Stamp Duty.
Instant Closure:
You have the ability to close out positions instantly, releasing
any profits and an instant return on margins.
Corporate Actions:
You receive dividends on the ex- dividend date, rather than
the pay date. Bonus issues and stock splits are also realised
on CFD positions, even though you are not the physical owner
of the stock.
Realised Profit
& Losses: As prices are marked to market daily,
any profits/losses are realised daily.
Derivative Products
Products you can trade as CFDs
- All UK Equities (Margin may be variable
on Smaller Cap Stocks)
- Indexes (FTSE, European, Dow, American)
- Foreign Stocks
- CFDs on Options
Alternative Products provided by the
Derivatives Dept
- Covered Warrants (Brand New Market)
- Structured Product, such as capital guarantee
bonds
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International
offices
Hichens Harrison
(Africa) Ltd
Johannesburg
Cape Town
Hichens Harrison
(Asia) Ltd
Jakarta
Kuala Lumpur
Hichens Harrison
(South America) Ltd
Buenos Aires
Rio de Janero
Hichens Harrison
(Middle East) Ltd
Dubai
International offices |
