CFD Services Overview

What is a CFD?

A CFD is a Contract for Difference and trading them is no different in principle to the way you may trade a normal share, however, the risk/reward ratio is significantly greater.

A CFD is essentially an agreement between two parties to exchange the difference between the opening and closing price of a stated transaction, multiplied by the number of shares specified in the contract.

Instead of paying the full value of a share and becoming the owner, you instead only pay a deposit of 10% of the share’s value and at no stage take ownership. Unlike spread betting, CFDs trade at the prevailing market price (no added spread) and they do not have an expiry point (although you do pay a daily interest on long positions).

The benefits of CFDs

In CFD trading you receive the full benefit of any profits, dividends or uplift achieved on the full amount you are controlling, but are equally responsible for any loss. Another key attraction of trading with CFDs is that they can be used with great effect to take advantage of a developing pattern in the market.

Furthermore, counter to the traditional way of making a profit with shares, a CFD can be used to make a profit by anticipating a fall in value as much as a rise in value.

The tax implications of CFDs

Although CFDs do not attract stamp duty they are subject to CGT and income tax.

The risks

As you are only required to deposit what is sometimes just a tenth of the amount you wish to control, there is a fundamentally greater risk in using CFDs over a traditional certificated share. They are therefore only really recommended to the experienced investor and our CFD specialists will work with you to:

• Carefully assess your exposure to risk; and
• Create disciplined strategies around highly focused trading.

CFDs are classed as financial derivatives and as such carry a significantly greater risk than normal equities.  See our risk warning for more details.

Simple Investments CFDs Services

• CFD Advisory Account - advising, setting up and managing your account
• CFD Execution Account – trading and monitoring your CFDs
• CFDs within SIPPs/SASSs – advice and guidance when using CFDs within SIPP/SASS pensions

Interested? Give Mark Allen a call on 01483 413500 or email him on mark@simple-investments.co.uk.