A CFD is a contract between two parties agreeing to exchange the difference in the value of a security, instrument or other asset between the time at which the CFD is opened and closed.

CFDs are a versatile product growing in popularity as a short term investment tool. They provide an efficient way to increase the power of your investment capital, can help you diversify an existing portfolio or hedge an open position.

Speculate in both rising and falling markets

A CFD is a derivative of an underlying asset. You don't physically own the underlying asset, but can participate in its price movement. Unlike traditional stocks and shares this allows you to potentially profit in both rising and falling markets.

Leverage your investment - trading on margin

CFDs are a highly leveraged product enabling investors to increase the power of the capital they have available to invest. You are required to hold only a % of the total value of the contract. This % acts as a deposit and will vary depending on the volatility and liquidity of the asset to which the CFD relates.

Pay no stamp duty

Under current UK tax laws, CFDs enable investors to trade without having to pay the stamp duty that is applicable to traditional UK stocks and shares (tax laws can and may change).

Hedge an existing portfolio quickly and easily

Holders of existing portfolios can quickly protect themselves against short term price corrections and hedge their positions using a CFD. This is a cost effective alternative to the costs that would be incurred if they were to exit their position prematurely.

Release existing equity

Due to leverage, investors can convert existing equity portfolios to CFDs releasing the capital difference, whilst still maintaining the same level of exposure to the underlying security.

The risks of trading CFDs

Always consider your risk appetite and your investment strategy. Leverage magnifies profits, but also losses. CFDs are therefore not for everyone.

Unlike traditional stocks and shares if the market moves against you significantly, it is possible to lose more money than your initial investment.

You do not own the underlying security meaning you are not a shareholder and have no voting rights.