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1: Long trade with net profit

In this example an investor believes the share price of British Telecom will rise. The investor wishes to go long (buy) 10,000 worth of BT shares priced at 2 each.

With a CFD, you only need to invest 1,000 (10% of 10,000) to open this position and unlike shares, you don’t pay 0.5% Stamp Duty.

Opening trade Buying shares Buying a CFD
Total value of shares 10,000 10,000
Initial outlay 10,000 1,000
Commission (0.5%) 50 50
Stamp Duty (0.5% on shares) 50 0

After 10 days, the share price rises to 2.10 and you sell at a profit. With a CFD, your deposit is returned to you, together with your profit.

Closing trade Selling shares Selling a CFD
Closing value 10,500 10,500
Commission (0.5%) 50 50
Financing charges 0 9.50
Net Profit 350 390.50

Like normal share dealing, with CFDs you deal at the cash price of the share and pay a commission on both the open and the close, which is calculated as a percentage of the value of the transaction.

The above examples use our standard commission rate of 0.5%. Galvan’s commission rates range from 0.2% to 0.5% depending on account size.

The financing charge on a long CFD is based on LIBOR + 3%. Based on current LIBOR rates, on a 10,000 long position, this works out at around 0.95 per day.

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Trading in Contracts for Difference may not be suitable for all investors due to the high risk nature of the product. You may lose all or more of your initial deposit through the use of leverage and may be required to make additional payments by way of margin on a frequent and sometimes daily basis. Failure to do so can result in the closure of part or all of your position. Please refer to Galvan’s risk warning.