TRADING WITH CFD EXAMPLE

Let us assume that Dell is currently trading at $19.29/19.30. You believe that due to a positive earnings figure, the stock will further appreciate to $20.00. You could buy the Dell stock at $19.30 or buy the CFD instead at $19.30 which requires less capital outlay.

Comparing the stock and CFD: 

Let us assume Dell finally makes a move to $21.00. We hence choose to close our stock at this price and collect the difference..

Share

Profit/Loss   :  (Sell price – Buy price) x No. of shares

                  :  (21.00 – 19.30) x 10,000 = $17,000

CFD

If the bid price stock is at $21,

Profit/Loss   :  (Sell price – Buy price) x No. of shares

                      :   (21.00– 19.30) x 10,000

                      :   $17,000

However, what if we are wrong, and Dell instead makes an adverse move to $17.60. Assume we take a loss at this point.

Share

Profit/Loss   :  (Sell price – Buy price) x No. of shares

                     :  (17.60 – 19.30) x 10,000 =

                     :  -$17,000

CFD

If the bid price stock is at $17.60,

Profit/Loss   :  (Sell price – Buy price) x No. of shares

                     :   (17.60– 19.30) x 10,000

                     :   -$17,000