Example of Going Long & Short

Phillip CFD Education | CFD Trading Examples

Jasvind currently has a bullish view on Stock A. Stock A is currently trading at a price of $3.00. Jasvind BUYS 5,000 contracts at the Ask Price of $3.00. Below are the details of Jasvind’s trade:

Details of Jasvind’s Trade
Open Price$3.00
Closing Price$3.25
Initial Margin=$3.00*10%*5,000 contracts
=$1,500
Profit/ (Loss)= (Closing Price – Opening Price)*Quantity
= ($3.25-$3.00)*5,000
= $1,250
Opening Commission (incl. GST)$26.75
Closing Commission (incl. GST)$26.75
Finance Charges (FC)Assume Jasvind closes the position on Day 4:
Closing Price of Stock A:
Day 1: $3.10
Day 2: $3.15
Day 3: $3.20


Day 1 Finance Charge:
=$3.10*5,000*2.5%/365
=$1.06

Day 2 Finance Charge:
=$3.15*5,000*2.5%/365
=$1.08

Day 3 Finance Charge:
=$3.20*5,000*2.5%/365
=$1.10

Net Gain/(Loss)=1,250-26.75- 26.75-1.06-1.08-1.10
=$1,193.26
Return on Equity=1,183.26/1,500
=79.55%

*However, if the price went against Jasvind and he closed the contracts at 2.75. He would have made a loss of -$1,250 and a ROE of about -80%.

Jasvind currently has a bearish view on Stock A. Stock A is currently trading at a price of $3.00. Jasvind SELLS 5,000 contracts at the Ask Price of $3.00. Below are the details of Jasvind’s trade:

Details of Jasvind’s Trade
Open Price$3.00
Closing Price$2.75
Initial Margin=$3.00*10%*5,000 contracts
=$1,500
Profit/ (Loss)= (Opening Price – Closing Price)*Quantity
= ($3.00-$2.75)*5,000
= $1,250
Opening Commission (incl. GST)$26.75
Closing Commission (incl. GST)$26.75
Finance Charges (FC)Assume Jasvind closes the position on Day 4:
Closing Price of Stock A:
Day 1: $2.90
Day 2: $2.85
Day 3: $2.80


Day 1 Finance Charge:
=$2.90*5,000*2.5%/365
=0.99

Day 2 Finance Charge:
=$2.85*5,000*2.5%/365
=$0.98

Day 3 Finance Charge:
=$2.80*5,000*2.5%/365
=$0.96

Net Gain/(Loss) =1,250-26.75- 26.75-0.99-0.98-0.96
=$1,193.66
Return on Equity =1,193.66/1,500
=79.58%

*However, if the price went against Jasvind and he closed the contracts at 3.25. He would have made a loss of -$1,250 and a ROE of about -80%.

Jasvind currently has a bullish view on Stock A and is contemplating using either CFD or Stocks to execute his trade. Stock A is currently trading at a price of $3.00. Jasvind want to BUY 5,000 shares (stocks) or contracts (CFDs) at the Ask Price of $3.00. Below will be the details of Jasvind’s trade:

N/A

Details of Jasvind’s Trade
CFDsStocks
Open Price$3.00$3.00
Closing Price$3.25$3.25
Initial Margin/Capital=$3.00*10%*5,000 contracts
=$1,500
=$3.00*5,000 shares
=$15,000
Profit/ (Loss)= (Closing Price – Opening Price)*Quantity
= ($3.25-$3.00)*5,000
= $1,250
= (Closing Price – Opening Price)*Quantity
= ($3.25-$3.00)*5,000
= $1,250
Opening Commission (incl. GST)$26.75$26.75
Closing Commission (incl. GST)$26.75$26.75
Finance Charges (FC)Assume Jasvind closes the position on Day 4:
Closing Price of Stock A:
Day 1: $3.10
Day 2: $3.15
Day 3: $3.20


Day 1 Finance Charge:
=$3.10*5,000*2.5%/365
=$1.06

Day 2 Finance Charge:
=$3.15*5,000*2.5%/365
=$1.08

Day 3 Finance Charge:
=$3.20*5,000*2.5%/365
=$1.10

N/A
Opening Clearing & Access Fees (incl. GST)N/AApprox. $15
Closing Clearing & Access Fees (incl. GST)N/AApprox. $15
Net Gain/(Loss)=1,250-26.75- 26.75-1.06-1.08-1.10
=$1,193.26
=1,250-26.75- 26.75-15-15
=$1,166.50
Return on Equity=1,193.26/1,500
=79.55%
=1,166.50/15,000
=7.77%

 

*However, if the price went against Jasvind and he closed the contracts at 2.75. He would have made a loss of -$1,250 and a ROE of about -80% while trading on stocks would result on a ROE of about -8%.

Basics to CFD Trading