Introduction to CFD's

A Contract for Difference is an agreement to exchange the difference between the opening and closing price of a contract, multiplied by the underlying volume of that contract. This provides investors with a means to benefit from the movement in the price of an asset without first owning or having to borrow that asset.

Unlike many traditional markets, CFDs offer the added flexibility of allowing traders to go short in a stock or commodity they do not already own. This is one of the many benefits of CFDs which investors can use to hedge their underlying physical investments.

CFDs also offer the advantage of trading on margin, which means traders only have to deposit a small percentage of the underlying value of the positions they wish to trade. This significantly increases the profit - and loss - potential, which means only investors who are fully conversant with the market should consider using CFDs.

Often, share investing may incur stamp duty charges, whilst commodity trading may leave you with Exchange or broker fees – using CFDs can eliminate these costs and increase your overall profitability and the efficiency of your investment strategy.

Many CFD contracts will not have a fixed expiry date unless the underlying market (for example a commodity Futures contract) has an expiry date. This means you can keep your position open, add to it or reduce your exposure, as the market evolves and you refine your trading profiles, without being under any time pressure.

Where CFDs differ from traditional investments, such as buying equities, is that there is no physical delivery of the underlying investment. By buying a CFD, you are investing in the expectation that the price of the underlying market is going to rise; you do not actually own any of the underlying shares or commodity that the price is quoted on.

Contracts for Difference are a very flexible means of trading, especially due to the ability to ‘go short’ in a market without owning any of the underlying stock or commodity. This is particularly applicable to equity CFD’s.

Trading CFD’s with One Financial also provides investors with immediate execution – there is no ‘call back’ with confirmation that the order to your Stockbroker or Futures Broker has been filled and the price you see is the price you get: when you click ‘buy’ or ‘sell’ your order is filled at that price.

Unlike traditional trading where you will trade a number of shares, with CFD's you trade a number of Contracts. A full list of the Contracts you can trade with One Financial is provided. This gives you all the details of the markets, spreads, values and terms for each Contract we offer.