Share CFD's

Trading Examples

 

1. You think the price will go up.
This trade is called a Long Position.


First, let’s look at the costs and profits of a successful share trade using a CFD and compare it to one buying the shares outright. There is a listed diversified resource company called XYZ Ltd. It is trading at a 6 month low of $62.00. You feel that some of the downturn in the resources sector is lifting and that XYZ should move higher as a result. You decide to purchase a CFD for 1000 XYZ shares. One day later your theory is proved correct and XYZ is trading at $63.50. You could hold on and see if they go higher but decide to get out while the going’s good. You close your CFD. The charts below illustrate just how much the MarketsPlus CFD has leveraged your investment.

 

CFD TRADE (XYZ)

PHYSICAL TRADE (XYZ)

BUY 1000 X $62.00 = $62,000

BUY 1000 x $62.00 = $62,000

5% x $62,000 = $3,100

 

Initial Outlay is $3,100

Outlay Required is $62,000

1 Day later XYZ is trading at $63.50
Closing the XYZ Position

1 Day later XYZ is trading at $63.50
Closing the XYZ Position

SELL 1000 x $1.50 (the difference)

SELL 1000 x $63,500

Gross Profit is $1,500*

Gross Profit is $1,500

Return on Investment: 1,500/3,100 = 48.40%

Return on Investment: 1,500/62,000 = 2.42%

*The commission and financing costs are: $62,000 x 0.1% = $62.00
$62,000 x (RBA + 3%) x 1 = $12.74(RBA = 4.5%)
365
TOTAL: $74.74

 

2. You think the price will go down.
This trade is known as a Short Position.

ABC Ltd is a listed retailer currently trading on a 52 week high of $22.00. You think a recent negative trading update by the company should see the price fall. To profit from this you decide open a short position trade through us by selling a CFD over 1000 ABC shares at $22.00. The charts below illustrate just how much the MarketsPlus CFD will return on your investment, if you are right.

 

CFD TRADE (XYZ)

PHYSICAL TRADE (XYZ)

SELL 1000 X $22.00 = 22,000

The current Australian regulatory environment

10% x 22,000 = $2,200

prevents the naked short selling of any shares.

Initial Outlay is $2,200

A scrip lending agreement would need to be in

3 Days later ABC is trading at $20.00
Closing the ABC Position

place before trading this strategy.

BUY 1000 x $2.00 (the difference)

 

Gross Profit is $2,000

 

Return on Investment: 2,000/2,200 = 90.90%

 

*The commission and financing costs are: $22,000 x 0.1% = $22.00
$22,000 x (RBA - 3%) x 3 = $2.71(RBA = 4.5%)
365

TOTAL trade cost on short

= Commission – financing

= $22.00 – $2.71

= $19.29

 

There may be an additional scrip borrowing fee associated with this trade if it is incurred by us on your behalf.


The risk-v-reward profile of this trade is; the maximum profit is the total face value of the trade,
the maximum loss is unlimited.

 

Suitability.

Remember, CFDs are leveraged trading instruments that carry greater risks than more conventional un-geared investments such as shares. At MPlus Markets we caution that CFDs are not suitable for everyone and losses can exceed your initial deposit. They should only be traded by those investors comfortable with the risks of leveraged investing. We have not taken into account your objectives, financial situation or particular needs and you should obtain your own legal, financial, taxation and other professional advice to determine whether CFDs are appropriate for you.

Share CFD's
_sidetext.gif

Who is MPlus Markets?

MPlus Markets is a proudly Australian owned trading business. We are committed to small investors and opening the door to a broad range of markets, both domestically and globally, that have previously been difficult for them to access.

Disclaimer:

Mplus Markets is incorporated in Australia (ACN 160 992 389) and is an authorised representative of FPMarkets (Authorised Representative number 433025). First Prudential Markets Pty Ltd trading as FP Markets holds an Australian Financial Services Licence (number 286354) issued by the Australian Securities and Investments Commission (ASIC). Commission, interest, platform fees, dividends, variation margin and other fees and charges may apply to financial products or services available from FP Markets Pty Ltd. The information in this website has been prepared without taking into account your personal objectives, financial situation or needs. You should consider the information in light of your objectives, financial situation and needs before making any decision about whether to acquire or dispose of any financial product. Derivatives can be risky; losses can exceed your initial payment and you must be able to meet all margin calls as soon as they are made. FP Markets CFDs are offered as over-the counter (OTC) products and are therefore not traded on an exchange. When trading Contract for Difference (CFD) you do not own or have any rights to the CFDs underlying assets. FP Markets recommends that you seek independent advice from an appropriately qualified person before deciding to invest in or dispose of a derivative. A Product Disclosure Statement for each of the financial products available from FP Markets can be obtained either from this website or on request from our offices and should be considered before entering into transactions with us.