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How do CFDs Work?

CFDs are an agreement between you and a broker to exchange, at the closing of the contract, the difference between the opening and closing prices, multiplied by the number of shares in the contract.

Each Contract for Difference corresponds to an individual company share - such as BskyB, Vodafone or Barclays. It is quoted in exactly the same way, and its movement mirrors the ups and downs of the corresponding share. (CFDs are also available on Industry Sectors, Indices, Commodities, FX pairs and Treasuries and are traded in much the same way)

As with shares, you can buy or sell a CFD whenever you wish. You can choose to hold  position for months or merely a few hours.

Unlike shares, you cannot take delivery of a CFD. Instead, you settle the difference between the opening and closing prices, and the difference is your profit or loss.

CFDs are not traded on a stock exchange, but are transacted directly with a specialist market maker and offer no shareholder voting rights, no certificates and you pay no stamp duty (0.5% under current UK legislation) or any safekeeping or custody fees.

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