Benefits of CFDs

The benefits of CFDs vs Share trading

Alternative to traditional share broking. The table below illustrates how a share investment held for 30 days might compare to if it was done as a CFDs trade.

  Trading traditionally Central Markets
Buy 10,000 shares @ 140.0p 140.1p
Cash outlay* (£14,000) (£1,401)
Sell 10,000 shares @ 200p 199.9p
Gross profit £6,000 £5,980
Stamp duty** (£70) £0
Commission (buy/sell) (£25.50) £0
Tax @ 18% (£1,080) (£1,076.40)
Overnight financing £0 (£30)
Net profit £4824.50 £4873.6
Return on Capital Employed 34%

347%

  ROCE working: 4824.5 / 14000 x 100% ROCE working: 4873.6 ÷ 1401 x 100%

* This is using a Margin requirement of 10%. NB you can lose more than this deposit.
** Tax laws can change. Remember that the risk is still the same for either scenario.

For example, if the company you were trading on was to go bust and its share price plummeted to 0p overnight, then you would still be liable to a £14,010 loss with Central Markets and not just the 10% deposit of £1,401.

The other benefit of executing this trade as a CFD is that you’ve freed up almost £12,600 of spare capital to use elsewhere or remain in the bank earning interest (which could go some way to paying for the overnight financing).

As with all CFDs you do not own or owe the underlying asset.

So, if you open a buy CFD on a share you will not have any voting rights.

Risk Warning:

CFD’s are highly complex and carry a high degree of risk to your money.  It is possible to lose more than your initial investment as you may have to pay more money into the investment than you did at the start, to make up for the difference.  So make sure you fully understand the risks involved and seek professional financial advice if necessary.  You should only take a risk with money you can afford to lose.