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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 here – this gives you all the details of the markets, spreads, values and terms for each Contract we offer.


About ETFs:

Exchange traded funds are similar to mutual funds in that they hold baskets of stocks or commodities, but can be bought and sold with the convenience of stock investing. There are many types of ETFs that serve every investing and trading need. ETFs trade just like any other company on a stock exchange, with its price changing throughout the day, fluctuating with supply and demand.

For individual investors, ETFs combine the best elements of stocks and mutual funds. They offer investors the diversification that mutual funds offer with the control and convenience that comes with stock investing. Investors can trade a basket of stocks or commodities that cover a whole sector, rather than trading an individual stock or commodity that might be extremely volatile, or illiquid. Exchange traded funds trade all through the trading day and therefore it is possible to use limit, stop loss and market orders.
There are exchange-traded funds that track major market indices like S&P 500 which can be used to provide quick diversification to a traders’ portfolio. Global investing is made easy with exchange-traded funds focused on specific regions and countries.

The growing demand for commodities from emerging markets has made commodity-focused exchange-traded funds some of the most popular ETFs in recent years. There are exchange-traded funds that track every major commodity from metals to oil to agricultural commodities. This allows individual investors to invest and track the commodity market with the convenience of stock investing. Before commodity ETFs arrived, individual investors had to learn about commodity futures markets or invest by proxy i.e. investing in stocks of companies that are involved in exploration, mining or production of these commodities. Now, using commodity exchange traded funds, commodities can be traded without the execution risk involved by investing in companies involved in the commodity business.

About Forex:

Foreign exchange is one of the most exciting, liquid and fast-paced markets in the world. The average daily volume of trade in the global foreign exchange market exceeds US$ 2 trillion. The foreign exchange market is not situated in any particular place; it exists wherever currencies are traded. Until recently trading in the foreign exchange market was the domain of large financial institutions and banks, but the emergence of the internet changed all of this, and it is now possible for ordinary investors to buy and sell currencies in market sized clips.

Each foreign exchange transaction involves the simultaneous buying of one currency and the selling of another. These two currencies are known as a currency pair. For example, a currency quote of the US Dollar verses the Japanese Yen is: USD/JPY 115.00. The Dollar in this example is the base currency and the Yen is the quote currency, so in this example one Dollar is equal to 115.00 Yen. If you are buying the Dollar it will cost you 115.00 Yen per Dollar. If on the other hand you were selling the Dollar you would receive 115.00 Yen for each Dollar you sold.
Foreign exchange can traded on margin, typically of 100/1, which means you can control 100 times more currency than your initial stake. For example, a $1000 margin allows the trader to profit from the price movements of $100,000. This magnifies the potential profit and loss available to the trader.

Extreme liquidity and the availability of high leverage have helped to spur the market's rapid growth and made it the ideal place for many traders. Positions can be opened and closed within minutes or can be held for extended periods. Currency prices are based on considerations of supply and demand, economic and political events and technical movements; the size and transparency of the market does not allow even the largest inter-bank players to move prices at will so prices cannot easily be manipulated in the major currency pairs.

About Futures:

A futures contract is an agreement to buy or sell a commodity, such as crude oil, or a financial instrument, such as the US Dollar, on a particular date in the future, at an agreed upon price. Futures are derivatives, because their price is derived from the value of another, underlying instrument or product.

Buying and selling a futures contract does not transfer ownership, as buying or selling a stock does. Rather, it spells out the terms under which the underlying commodity is to be purchased or sold at a later date.
A futures transaction always has two parties, a buyer and a seller, and you can enter the market either way. If you buy a contract, you take a long position and are called the long. If you sell a contract, you take a short position and are called the short.

To liquidate and leave the futures market, you need to cancel your existing futures position either by offsetting your contract with a matching futures contract on the opposite side of the market, or by delivering or taking delivery of the commodity or its cash value. For example, if you have a long position on 5,000 barrels of oil deliverable in January, you need to short — or enter a contract to sell — 5,000 barrels of oil deliverable in January or expect to have the 5,000 barrels delivered to your doorstep. The difference between the price of your contract and the price of an offsetting contract represents the profit or loss of the position.

Futures contracts are highly leveraged instruments. Leverage is the ability to control large Dollar amounts of a commodity with a comparatively small amount of capital. The margin acts as a performance bond that is available to the futures broker to meet your obligations for potential losses on a futures position. During the term of a contract, you must maintain the margin level of your account, adding money if required to cover the loss if the value of the contract you hold drops.