Overnight funding for the following instruments is calculated in the same way as for commodities without fixed expiries:
EU Volatility Index, French OAT, German Bobl/Bund/Buxl/Schatz, Italian BTP, Japanese Government Bond, UK Long Gilt, US 2-Year/5-Year/10-Year T-Note, US Dollar Basket, US Treasury Bond, US Ultra Treasury Bond, Volatility Index.
Prices on these markets for cash CFDs are synthetically created using the two most liquid futures contracts. This will result in a natural movement between these two contract prices and will be included in overnight funding adjustments. You’ll then either be debited or credited depending if you’re long or short, and whether the next future contract price is higher or lower.
Funding is based on the market cost of carry, plus an admin fee of 2.5% per annum.
Please note that open positions held through 11pm (Swiss time) on Fridays will be adjusted for three days’ worth of funding to cover the weekend.
There are three steps to this formula:
1. Basis (the daily movement along the futures curve)
(P3 – P2) ÷ (T2 – T1)
T1 = expiry date of the previous front future
T2 = expiry date of the front future
P2 = price of front future
P3 = price of next future
2. IG Bank charge
Price x 2.5% ÷ 360/365
Number of contracts x value per contract x (basis + IG Bank charge)
365-day divisor used for the FTSE 100 and other GBP, SGD and ZAR denominated markets. This divisor will also be applied to all commodities denominated in CNH.
360-day divisor used for all other markets.
You’re short 100 contracts on the Volatility Index
The contract value is €100
T2 - T1 = 31 days
P2 price is 15.50
P3 price is 16.50
Basis = (16.50 - 15.50) ÷ 31 = €0.03
IG Bank charge = 15.50 x 2.5% ÷ 365 = €0.001
Adjustment = €100 x (€0.03 - €0.001) = €2.9*
*€2.9 will be credited to your account as you were short, and the next future contract was higher than the front contract.