Quick-start guide for operating with CFDs in BBVA TRADER

CFD account Balance: it is the total cash in your CFD Account. If you click on the arrow you can see the intraday cash movements divided into:

i) daily realized P&L,

ii) Deposits,

iii) Cash withdrawals,

iv) Other

v) Fees.

Unrealized P&L: lists the changes that occurred in the value of your CFD positions during the current trading day.

Daily P&L = Daily P&L + Unrealized P&L, i.e., it is the sum of profits and losses from open and closed positions during the current trading day.

Total capital = account balance + unrealized P&L, i.e., total capital is the cash you have in the account plus unrealized profits or losses from your open positions. If you have open positions, part of the total capital is blocked as a Margin. The Total Capital must always be greater than the required Margin.

Retained Margin: shows the Margin used for all open positions. This is the amount that is blocked in your account, which will protect it against adverse market movements. The Margin is calculated in real time and will change as soon as the value of the open positions changes. The margins are explained in more detail below.

Free capital: free capital is the amount available for trading and is calculated as the total capital minus the Retained Margin for positions already open.

Margin usage bar: At the top of the BBVA Trader CFD screen, above the account balances, you'll find the Margin Usage Bar. It shows the Retained Margin / Total Capital ratio, i.e. how much of the Total Capital is used as Retained Margin. The orange and red sections on the right side of the bar show when the use of the Margin reaches 80% and 90% of the Total Capital, in which case the corresponding notifications are activated. 

To open a long or short CFD position, we will enter a purchase or sale order through the order window. The order window opens when you are looking to Buy or Sell in each CFD in the tracking/favorites list (there are also many other ways to open the order window). There are two prices for each CFD: sell and buy according to the order that is entered.

We will open a long CFD position by entering a purchase order, and it will be negotiated at the price shown below the label entitled "Buy" on the screen. When you close the position, you will operate at the price shown under the "Sell" label on the screen. The following image shows an example of the order window where you can enter an order on the US TECH 100 index.

For simplicity, the following example assumes that there is no fee and that the position is closed the same day, so no financing cost is applied.

The selling price (to open a long CFD position) is 13,251.75. The selling price (to open a short CFD position) is 13,249.75. In this example, we will enter a purchase order into "Market," which means that the operation will be executed at the purchase price at that time. We decided to buy 5 CFD contracts, setting the "amount" as 5. The Notional value is the value of the Underlying Asset, i.e. Quantity x Purchase Price = 5 x 13,251.75 = USD 66,258.  The Margin is a fixed percentage (called Margin) of the Notional value, expressed in EUR.

Once the order has been sent to the market and executed, you will have long CFD position open on the US TECH 100 index. The type of order chosen, "Market," means that the operation will be executed as soon as BBVA Trader CFD captures the Order and the Purchase price at that time. In this example, we assume that the operation is realized at USD 13,251.75, but it could be lower or higher depending on the value of the underlying asset at that time.

If you wish to carry out your operation at a specific price, you can choose to enter a "Limited" order, which means that the operation will only be executed If the purchase price of the Underlying Asset in the market is equal to or better (from the investor's point of view) than the limit price entered.

Immediately after the operation has been executed, account balances are updated. The Initial Margin required to open the position in the example was EUR 2,716.64, which means that the Retained Margin increases by this amount, while the Available Capital, which is calculated as the difference between the Total Capital and the Retained Margin, decreases. This Margin is calculated on the Notional value of the operation to which the corresponding exchange rate applies.

In the case of a CFD on which a fee is applied, the amount of this fee will be deducted from the Available Capital. To find out the potential costs incurred by the investor when operating in BBVA Trader CFD, click on the following link.

Sale/purchase price: Prices have risen by USD 5, but the spread (difference between supply and demand) remains at USD 1.

• Number of Contracts: the number of CFDs purchased has not changed.
• Strike price: the price at which the operation was executed has not changed.
• Notional value: increase in the selling price x number of contracts / exchange rate = 13,254.75 x 5 / 1.22 = EUR 54,322.75.
• Unrealized P&L: (Selling Price - Strike Price) x Number of contracts as this is a Long CFD Position (13,254.75 – 13,251.75) x 5 = USD 15 = EUR 12.30
• Margin: The margin applicable to this CFD position increases because the Notional value has increased, and, therefore, the retained margin also increases.

Margin parameter x notional value = 5% x EUR 54,322.75 = EUR 2,716.14

Sale/purchase price: Prices have dropped USD 10, but the spread (difference between supply and demand) remains at USD 2.

• Number of Contracts: the number of CFDs purchased has not changed.
• Strike price: the price at which the operation was executed has not changed.
• Notional value: selling price x number of contracts / exchange rate = 13,239.75 x 5 / 1.22 = EUR 54,261.27
• Unrealized P&L: (Selling price - Strike price) x Number of contracts = (13,239.75 – 13,251.75) x 5 = USD -60 = EUR -49.18 
• Margin: In this case, the margin applicable to this CFD position decreases because the Notional value has decreased and, therefore, so will the Retained Margin.

Margin parameter x notional value = 5% x EUR 54,261.27 = EUR 2,713.06

Changes in the price of the US TECH 100 index during the life of an open CFD position on the US TECH 100 index will not only affect the securities in the Open Position window as described above, but it will also affect the account balances at the top of the screen where changes in Unrealized P&L, Retained Margin, and Available Capital are aggregated over all open positions.

If you maintain the CFD position after the Trading Hours of the Underlying Asset have expired or after 22:00h CET (Overnight Position), you must take into account that there is an additional cost, called a financing cost, applied on the Notional value. This amount will be taken into account when calculating the daily settlement, and, where applicable, the corresponding amount will be charged or paid into your Cash Account. For more details on financing costs, see the BBVA Trader CFD fee schedule.

Example. Purchase of 5 CFD from the US TECH 100 index. Purchase price USD 13,251.75; Exchange rate 1.22; Notional value EUR 54,310.45

If you maintain the overnight position and the market closes in 13,260.75, you would have the following unrealized profits and losses: USD 13,260.75 – USD 13,251.75 = USD 9 x 5 = USD 45 / 1.22 = EUR 36.88.

Conversely, if the market closes at USD 13,230.75; you would have unrealized profits and losses: USD 13,230.75 – USD 13,251.75 = -21 x 5 = USD -105 / 1.22 = EUR -86.06.

Financing cost: Notional value x (Spread + Interest Rate (in the example, USDLIBOR 1M / 365 = EUR 54,310.45 (2.5% + 0.09%) / 365 = EUR 3.85/day.

The Margins are calculated as a percentage (the Margin Parameter) of the Notional value. Normally, the Margin Parameter is fixed by asset class, and you can consult it in both the product details and the order. This is important, as Margin requirements can be adjusted temporarily upwards. The Required Margin shown at the top of the screen is the aggregate margin for all open positions and is calculated as the largest:

i) of 50% of the sum of the Initial Margins for all open CFD Positions and,

ii) the sum of the margins in real time, margins calculated for all open CFD Positions.

In the event the required margin is equal to Total Capital (i.e. there is no Available Capital), the so-called Closing of Positions will be activated, where open positions are automatically closed until the Total Capital returns to at least 50% above the required Margin. The system will begin to sell the positions with the largest Margin in which the trading market of the underlying asset is open.

Margin notices are generally reported when the required Margin reaches 80% and 90% of the Total Capital. The case could arise where the Closing of Positions procedure is activated without BBVA Trader CFD having given prior notice, as sometimes there are quick movements in the market that do not allow BBVA to do so.

Therefore, the Initial Margin of a position is the Margin that was calculated when the position was opened. The real-time Margin for a position is the margin calculated using the prices shown on the BBVA Trader CFD platform at any given time.

Prior to the execution of the order, it contains a summary of the initial costs and expenses that will be applied. You can also consult these costs and expenses in the pre-contractual documentation that you will receive prior to executing the order (Service Information Annex).

The most important costs when operating in CFDs are:

• • Entry cost = Fee (if applicable) + Half of the spread multiplied by the Number of contracts.
• Exit cost = Fee (if applicable) + Half of the spread multiplied by the Number of contracts.
• Financing cost = spread (+/-) interest rates x days until the next business day / 365. For more information on the calculating the cost of financing on BBVA Trader CFD, click on the following link.