From TheBestLinks.com
CFDs or Contracts For Differences are a leveraged equity derivative that allow users to speculate on share price movements, without the need for ownership of the underlying shares.
The product allows investors to trade long or short and unlike other derivatives such as futures or options has no fixed expiry date or contract size.
Trades are conducted on a margined basis with margins typically starting at ten percent for CFDs on leading equities.
The contracts are subject to a daily financing charge, usually applied at a pre agreed rate above or below Libor or other interest rate benchmark.
Users pay to finance long positions and receive funding on short positions in leau of deffering sale proceeds.
The contracts are settled for the cash differential between the price of the opening and closing trades .
The use of CFDs has become widespread in the UK with some commentators suggesting that up to twenty five percent of UK Stock Market turnover is attributable to CFDs.
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