Stock and CFD equations
Buy a CFD is almost the same as having a stake. You mean have given added value of the shareholding, but without having its shares. Range of benefits that ordinary shareholders were also obtained to accomplish, among other things, capital gains and dividends. In order to further expand the horizons of this instrument, worth noting the similarities and differences between trading stocks and CFDs:
CFD trading with the quotation and the same performance with its shares traded on the conventional. For example: If the value of stocks increased by 20%, the value of CFD shares will rise by the same percentage.
Positive or negative impact on the stock due to fundamental news or data changes will be exactly the same on his CFD prices, because both have similar price movements.
- Action of the issuer (including dividends)
That event made by companies that have an impact for shareholders. Examples are: mergers, stock splits, dividends and so forth. The impact of this action will affect also the issuer of the CFD price. As with shares, with CFDs you will receive all the benefits of the actions of the issuer (or equivalent) which will be direct credit on your account. One exception is as a CFD trader, you do not have the right to vote on a resolution or a meeting of directors.
CFDs are traded by Over-The-Counter (OTC), so you can enter a new position or liquidate an existing position as is done directly on the stock (provided it has a large-cap stocks).
In general, spreads U.S. stocks varies but typically ranges from one to four points. For CFD spreads fixed, and can be as low as just two points.
Others with futures, stock purchase conventional and CFD has no expiration date, so you have the freedom to enter a new position or liquidate your position at any time you want when markets open. You can also leave the position open as long as you want it.
Stock and CFD difference
There are several important differences between the CFD and the underlying stock. These components are appropriate for you to understand before jumping on CFD transactions. The differences are:
As already discussed, CFD trading on margin can be as low as 10% of trade value. In stock trading, you can take a margin facility with borrowing. However, only 50% that can be used as a loan. While the CFD, the position at 10 times the amount of margin can be taken.
A CFD can be bought or sold in advance, so any chance of either bullish or bearish in the market. Short selling in the stock market for some stocks are not allowed. While in the U.S. stock market, shares can be sold in advance but are limited to regulations (uptick) and costly (because of the cost of borrowing).
Are factors to consider when investing in stocks. For CFD, CFD buyer can receive the benefits of the dividends if the shares have been purchased. But the main difference is for the purchase of U.S. stocks by conventional means, you are subject to the tax burden by 30% of dividends received. This is not the case in CFD. For example if you are entitled to receive dividends of $ 0.50/saham to 10.000 shares, you will receive a $ 5,000 fully to your CFD position, but for the purchase of shares with conventional, you will only receive a net amount of $ 3.500 for the taxation of 30%. Another advantage is the dividend distributed on ex-dividend date for the position of CFD buy. As for the stock, pay dividends received on the date determined by the issuer, which could take a month after the ex-dividend date. While the owner of CFD positions, will pay an amount equivalent to the ex-dividend date. Note: The position must be open before the ex-dividend date to receive the benefit of the dividend (the same conditions as stock).
CFD will pay the buyer a fee based on the overnight interest rate of U.S. LIBOR (London Inter-Bank Offered Rate) is valid. LIBOR is the interest rate used for interbank lending. In general, a difference of 3% for long positions. While the CFD seller will receive LIBOR minus 3%.
Because CFD is an OTC product and there is no central exchange then there is no queue order. Therefore, the term is also no partial fills for CFD as on the stock.
When buying a CFD, there is no element of corporate ownership in the transaction. So there is no voting rights and there is also no stamp duty costs as contained in the trading of shares of certain countries.
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