Buy 100k Vodafone @ 130p/ Sell 100k @ 139p

Two clients want to buy 100,000 shares in Vodafone as they believe the price will rise.

The price is currently 130p:

• Client A buys the physical shares through a stockbroker
• Client B buys a CFD
• A net dividend of 3p is paid while both clients are holding the position
• The share price rises and both clients close their positions 21 days later at a price of 139p

Most stockbrokers charge a commission each side of the trade.

Client A

• Will be charged a flat rate fee of £15
• Will receive 100% of the net dividend
• Must pay 50bps in stamp duty

Client B

• Will pay 5bps in commission
• Is required to deposit 15% of the contract value as the initial margin* requirement
• Will be charged overnight financing costs for the period that the CFD contract is held. This is calculated at LIBOR + 2.5% (for this example LIBOR is 0.5%), so the total is 3%.

	Stockbroker	CFD
Opening Position Cash Deposit Contract Value Commission Stamp Duty	100,000 shares £130,000.00 £130,000.00 (£15.00) (Flat Rate) (£650.00) (50bp)	100,000 shares £19,500.00 £130,000.00 (£65.00) (5bp) £0.00
Initial Cost Of Opening	£130,665.00	£19,565.00
Financing Costs Dividends (3p net) Financing costs (over 21 days)	£3,000.00 £0.00	£3,000.00 (£224.38) Libor + 2.5%
Net Holding Income	£3,000.00	£2,775.62
Closing Position Closing Contract Value Closing Commission	£139,000.00 (£15.00) (Flat Rate)	£139,000.00 (£69.50) (5bp)
Profit/Loss Net Profit/Loss	£9,000.00 £11,320.00	£9,000.00 £11,641.12
Return on Equity Invested	8.71%	59.70%

*initial margin of £19,500 is refundable and is held as security

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Buy £100k Barclays Bank -@ 330p / Sell @ 315p

Two clients want to invest £100,000 in Barclays as they believe the price will rise. (please note as you can't buy part shares the actual amount invested is £99,999.90). The price is currently 330p.

Client A

• Buys the physical shares, paying £15 commission and 0.5% (50 bps) stamp duty.

Client B

• Buys a CFD and pays 0.05% (5 bps) commission.
• As the cash deposit required to open a position is only 15% of the contract value, client B is able to leverage and open a proportionally larger position vs Client A.
• The client will be charged an overnight financing cost for the period that the CFD contract is held. This is calculated at LIBOR + 2.5% (for this example LIBOR is 0.5%), so the total is 3%.

5 days later the market price has fallen to 315p and both clients close their positions. The table below shows the outcome.

	Shares	CFD
Cash Deposit Opening Position (330p) Contract Value Commission Stamp Duty	£99,999.90 30,303 shares £99,999.90 (£15) (Flat Rate) (£500) (0.5%)	£99,999.90 202,020 shares £666,666.00 (£333.33) (5bp) £0.00
Initial Cost Of Opening	(£100,514.90)	(£100,333.23)
Financing Costs Interest costs (over 5 days)	£0.00	(£273.97)
Net Holding Income	£0.00	(£273.97)
Closing Position (315p) Closing Contract Value Closing Commission	£95,454.45 (£15) (Flat Rate)	£636,363.00 (£318.18) (5bp)
Profit/Loss Net Profit/Loss	(£4,545.45) (£5,075.45)	(£30,303.00) (£30,916.23)
Return on Equity (Incl. Charges)	(-5.05%)	(-30.81%)

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Air Liquide Sell 5k @ 75.95 / Buy 5k @ 74.73

Two clients want to sell 5,000 shares in Air Liquade as they believe the price will fall and they will be able to buy the shares back at a lower price.

The price is currently €75.95:

• Client A buys the physical shares through a stockbroker
• Client B buys a CFD
• No dividend is paid while the clients are holding the position
• The share price falls and both clients close their positions 10 days later at a price of €74.73

Most stockbrokers charge a commission each side of the trade.

Client A

• Will be charged a flat rate fee of €20.
• There is no stamp duty payable if your opening trade is a sell order

Client B

• Will pay 5bps in commission
• Is required to deposit 15% of the contract value as the initial margin* requirement
• With current low interest rates the client is charged for holding a short position, which is charged at (negative) (Euro LIBOR - 2.5%). In this example, Euro LIBOR is 1%, so the overall charge would be 1.5%.
• The financing cost for Euro stocks is divided by 360 (not 365) and multiplied by the number of days the position is held

	Stockbroker	CFD
Opening Position Cash Deposit Contract Value Commission Stamp Duty	5,000 shares €379,750.00 €379,750.00 (€20) (Flat Rate) n/a	5,000 shares €56,962.50 €379,750.00 (€189.88) (5bp) n/a
Initial Cost Of Opening	(€379,770)	(€57,125.38)
Financing Costs Dividends Interest costs (over 10 days)	€0.00 €0.00	€0.00 (€158.23)
Net Holding Income	€0.00	(€158.23)
Closing Position Closing Contract Value Closing Commission	€373,650.00 (€20) (Flat Rate)	€373,650.00 (€186.83) (5bp)
Profit/Loss Net Profit/Loss	€6,100.00 €6,060.00	€6,100.00 €5,565.06
Return on Equity	1.60%	9.8%

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