Authorised and regulated by the Financial Services Authority
CFDs allow you trade trade long and short on the major market indexes. Below is an example of a long and short Index trade.
The Spread: Imagine the FTSE is quoted at '4438-4440'. This quote represents the bid/offer spread for the FTSE, and is only 2 points.
The Bid: The bid price of 4438 is the price at which you can Sell FTSE contracts.
| Quote (bid/offer) | 4438-4440 |
| Buy price | 4440 |
| Size of position | 250 X 4440 = £1,110,000 |
| Initial outlay (using 1% margin) | £11,100 |
| Quote (bid/offer) | 4482-4484 |
| Buy price | 4482 |
| Size of position | 250 X 4482 = £1,120,500 |
| Initial outlay (using 1% margin) | £10,500 |
Costs (at 10 basis points) = £1,110 (entry trade) & £1120 (closing trade)
| Size of trade X (sell price - buy price) | profit or loss |
| 250 X (4482 - 4440) | £10,500 |
| Profit | £10,500 |
| Total costs | £2,230 |
By closing your position to realise a net profit of £8,270
This is obviously a favourable outcome, had the price moved against you would have incurred an equivalent loss. Blue Index strongly recommend the use of stop losses on every trade to mitigate potential downside.
For further information on Index CFD Trading please call the trading desk on +44 (0)20 7398 2553
The Spread: Imagine the S&P Index is quoted at '1112-1112.5'. This quote represents the bid/offer spread for the S&P, and is only ½ a point.
The Offer: The offer price of 1112.5 is the price at which you can BUY S&P contracts.
The Bid: The bid price of 1112 is the price at which you can SELL S&P contracts.
Going Short: You believe that the S&P will come down, and decide to SELL to 'go short' 1000 S&P contracts @ 1112 (the bid price).
Opening Sell: Customer Sells 1000 S&P contracts @ 1112
| Quote (bid/offer) | 1112-1112.5 |
| Sell price | 1112 |
| Size of position | 1000 x 1112 = USD 1,112,000 |
| Initial outlay (using 1% margin) | USD 11,120 |
Later: Your prediction is correct and the S&P Index falls. The quote on the S&P is now 1089.5-1090. You decide to close your S&P position @ 1090 (the offer price).
Closing BUY: Customer Buys 1000 S&P contracts @ 1090
| Quote (bid/offer) | 1089.5-1090 |
| Sell price | 1090 |
| Size of position | 1000 x 1090 = USD 1,090,000 |
| Profit/Loss | USD 22,000 |
Costs (at 10 basis points) = USD 1,112 (entry trade) & USD 1090 (closing trade)
| Size of trade X (sell price - buy price) | profit or loss |
| 1000 X (1112 - 1090) | USD 22,000 |
| Profit | £12,222 ($22,000/1.80) |
| Total costs | £1,223 ($2202/1.80) |
By closing your position to realise a net profit of £10,999.
Index CFDs have some important advantages over conventional exchange-traded stock index futures contracts, individual share dealing and spread betting:
Low Margin rates
Margin rates as low as 1% mean that you can gain significant leverage by trading Index CFDs.
Flexible Trading
By going long or short, Index CFDs give you a straightforward way of gaining a positive or negative exposure to a particular stock index.
No expiries
A CFD position on a stock index remains open until you decide to close it. There are no automatic expiries or roll-overs to worry about as there are with Futures and spread bets.
Risk management
Shorting the market using Index CFDs can facilitate a rough, low-cost, hedge to protect a diversified share portfolio against market falls.
Trade world markets
Index CFDs give the trader the ability to take a positive or negative view on any of the major global stock markets.
Tight Spreads
We are committed to providing the tightest bid/offer spreads possible on Indices.
24-hour dealing
We quote prices on leading stock indices even when the underlying markets are closed.
Immediate execution
You can deal immediately. It is not necessary to work an order in the market; although in some circumstances it may be beneficial to work the order over a period of time. Your personal trader can facilitate this for you if necessary.
This example show a favourable outcome, had the price moved against you would have incurred a loss. Blue Index recommend the use of stop losses on every trade to mitigate potential downside. For further information on Index CFD Trading please call the trading desk on +44 (0) 20 7398 2553
