Complete example for trading a CFD on stocks
Example on Stocks
-
Suppose you buy 500 CFD contracts on shares from an issuer trading at 11.27/11.28 (spread €0.01). Because it is a CFD on stocks, you will have to deposit a margin of 20% for this CFD. Therefore, you will have to pay the following margin:
11.28 x 500 = 5,640 x 20% = €1,128
Once you buy the 500 CFDs at €11.28, you will have a profit or loss based on the price movement in the market. For example:
- Trade with a profit:
If the price of the CFD goes up to 11.60 / 11.61 and you decide to close your position, the result will be as follows:
(11.60 x 500) - (11.28 x 500) = [5,805 - 5,640 = €165]
In the case of CFDs on stocks, there is a fee of €6, both for the purchase and sale, which means that the net profit of the transaction will be €153, equivalent to a return of 13.56%.
- Trade with a loss:
If, on the other hand, the price of the CFD drops to 10.90 / 10.91, the result will be as follows:
(10.90 x 500) - (11.28 x 500) = 5,450 - 5,640 = -€190. Adding in the purchase and sale fees, the total net loss will be EUR 202, equivalent to a return of -17.90%.
- Overnight financing cost:
If in either of the two examples above, you keep your position open overnight once the market closes, you will have to add the overnight financing cost to your costs. This cost is calculated as follows:Long position: Notional amount x (2.5% + benchmark rate %) / 365
The benchmark rate in this case is 1M EURIBOR.
We apply the formula for taking long positions: 5,640 x [2.5% + (- 0.54%)] / 365 = €0.30 / day.
Summary of the transaction costs
|
Notional value of the trade |
500 x 11.28 = 5,640 EUR
|
|
20% margin |
EUR 1,128 |
|
Spread |
0.01 |
|
1M Euribor |
-0.54% |
|
Entry cost
|
500 x 0.01 = 5/2 = 2.5 EUR
|
|
Purchase fee |
€6
|
|
Overnight financing cost*
|
5640 x (2.5% + (-0.54%)) / 365 = €0.30
|
|
Exit cost
|
500 x 0.01 = 5/2 = €2.5
|
|
Sales fee
|
€6
|
|
Total costs
|
€17.30 (equivalent to 0.3% of the initial investment)
|
|
*Only if the position is held from one day to another
|