See how CFD trading works in practice, with step-by-step examples on both long and short positions.
BHP has a sell price of $27.59, and a buy price of $27.60.
BHP’s next earnings announcement is fast approaching, and you expect it to be good news. You think the company’s share price will go up, so you buy 2000 share CFDs at $27.60. This is the equivalent of buying 2000 BHP shares.
Because CFD trading is a leveraged product, you don’t need to put up the full value of these shares. Instead, you only need to cover the margin, which is calculated by multiplying your exposure with the margin factor for the market you are trading.
So if BHP has a margin factor of 5%, then your margin would be 5% of the total exposure of your trade (2000 share CFDs x $27.6 = $55,200), or $2,760.
Our Australia 200 price is 5400.0 to sell or 5401.0 to buy.
You anticipate that an upcoming interest rate announcement from the RBA will negatively impact the index, so you decide to sell five contracts (the equivalent of $125) at 5400.0.
The Australia 200 has a margin factor of 0.5%, so you need to deposit (($125 x 5400) x 0.5%) $3375 as margin.