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Forex CFD trade overnight funding example

Imagine that you’re buying 5 contracts of GBP/USD, with a spread of 0.9, held for one night on Wednesday. Forex trades are settled on a T+2 basis, so if you hold a position overnight on a Wednesday, you pay to hold your position for three nights rather than one. You’ll only be charged one day of the IG admin fee on a Wednesday, however if you were to hold on a Friday you will pay three days of IG’s admin fee to account for holding over the weekend.

Underlying tom-next = 0.27/-0.3
Cash mid price = 13176
Admin fee = 13176 x 0.8% / 360
= 0.29
Tom-next with admin fee = (3 x 0.27) – 0.29 / (3 x -0.3) – 0.29
= 0.52 / -1.19*
*We use this negative number in our calculation, as this is a long position

Since this is a dollar trade, we need to convert it into sterling. Our admin fee is 0.5% of the conversion rate, so if the conversion rate is 1.3176, we’d get a rate of 1.311.

Total cost:

Spread = 0.9 x $50 = $45
Converted spread = $45 / 1.311
= £34.33
Overnight funding = -1.19 x $50
= $59.50
Converted overnight funding = $59.50 / 1.31
= £45.39
(£33.18 of which is the IG admin fee: (0.29 x 3) x $50 = $43.50, which
Total cost = £78.57

In the event that your base currency is different to the currency of the charge, you’ll see this converted at the predominate rate of the time on your statement.