'Buying' SPDR S&P/ASX 50 Fund
You believe Australian stocks are going to rise. You decide to trade an ETF CFD, SPDR S&P/ASX 50 Fund, listed on the ASX, which provides exposure to over 50 companies in Australia.
In the morning, the buy price for SPDR S&P/ASX 50 Fund is 40.56, and you buy 1000. Instead of putting up the full value of the shares ($40.56 x 1000), you only need to supply a deposit of 10% or $4056.
Following the release of positive Australian manufacturing data, our buy price for SPDR S&P/ASX 50 Fund stands at 41.02 and you decide to take your profit.
|Profit on trade|
|Profit on trade: 0.46 x 1000 = $460|
You calculate the overall result by taking into account the interest and dividend adjustments, and the commission you paid.
However, you would have made a loss that may have exceeded your initial deposit, had the market moved in the opposite direction.