Example 1: Equity (Shares) CFDs
Netflix Inc (NFLX) is announcing its 2nd quarter results tomorrow. In the belief the results will be better than expected, you BUY 1,000 CFDs. This means that for every Dollar the share rises, you win 1 USD, and for every Dollar it drops, you lose 1 USD (This is equivalent in size to buying 1,000 shares in the underlying market itself.). A commission of 100 USD ( 1% of investment) is debited from your account, i.e. (10 x 1,000 x 0.01%) =100 USD. Pulse individual equity markets are subject to a commission rate of 1% of investment.
At 7am the next morning Netflix Inc (NFLX) results are indeed above forecast.
By 08:30, the share is trading at 500 USD –501 USD.
You decide to take your profit and SELL 1,000 NFLX CFDs at 501.40 USD, thus closing your trade.
You have realised a trading profit of (501.40 USD – 500.00 USD)= 1.40 USD x your stake of 1,000 CFDs = 1,400 USD.
After taking into account the financing charge and commission, you have made a net profit of (1400 – 100 USD) = 1300 USD.
When you trade CFDs, you are always trading in the "base" currency of the underlying market. E.g. if you trade a US share, you are trading in cents.
| In price | 500 | |
| Out Price | 501.40 | |
| BUY 1,000 Share CFDs Investment | 10,000 USD | |
| Commission | 100 USD | |
| UNIT PROFIT/LOSS | USD | |
| PROFIT/LOSS | 1,400 USD | |
| TOTAL PROFIT | 1,300 USD |
|---|
NIGHT FINANCE ADJUSTMENT
As you hold the position overnight, a finance adjustment is made to your account.
This is calculated as follows: f = (s x p x r) / d where:
| f= | daly financing charge |
| s= | number of CFDs |
| p= | closing price as determined by Pulse Capital Invesments (458p-usually will be the price on ciose of the underlying share) |
| r= | revelant overmight LIBRO rate. PLUS 300 basis ponits for long position,or MINUS 300 basis points, e.g. (4.50% + 3.00%)=7.50% |
| d= | number of days, i.e. 365 for UK shares and 360 for all others |
Long (buy) trade positions are debited the daily financing charge
Short (sell) positions are credited the daily financing charge
So, the finance adjustment will be a debit to your account, equal to:
(2,500 x 4.56 x 7.5%) / 365 = £2.34
Note: All rollovers and associated finance adjustments are carried out at 10pm London time.
DIVIDENDS
Dividend adjustments are credited to long positions (buy trades) and debited from short positions (sell trades) held after the close of business on the day before the share is due to go ex-dividend. The exact amount of the adjustment depends on the dividend tax treatment of the relevant country, so:
| UK shares | Buy trades are created with 90% ofthe gross dividend. Sell tradesare debited with 100% of the gross dividend |
| US shares | Buy trades are created with 85% ofthe gross dividend. Sell tradesare debited with 100% of the gross dividend |
| Euro and others shares | Buy trades - amount variesfrom Sell tradesare debited with 100% of the gross dividend |
Remember: Using CFDs, you can generally go short ("Sell") of a share price – in expectation of that share price falling - just as easily as you can go long ("Buy") of a share price. (Occasionally, restrictions may be imposed on short-selling if the underlying stock is subject to a lack of liquidity.)
Example 2: Stock Index Market CFDs
The Pulse current quote for Nasdaq 100 (NDX) is 12,500 units (USD).
The Nasdaq 100 (NDX) index is trading around 12,500. After a strong rally of 200 points over the last month you believe the market may be due a fall. You SELL 20 CFDs at 12,500 USD.
For every point that our quote on the Nasdaq 100 index falls, you will win 20 usd, but for every point it rises you will lose 20 usd.
Two days later you see that our quote on the Nasdaq 100 has actually risen to 12,530 -12,529.
Deciding to cut your losses you close your trade and BUY 20 CFDs at 12,529.
This trade resulted in a loss of (12,500 – 12,529) = -29 x your stake of 20 CFDs = -580 usd.
| In price | 12,500 | |
| Out Price | 12,529 | |
| SELL 20 INDEX CFDs Investment | 5,000 USD | |
| Commission | 50 USD | |
| UNIT PROFIT/LOSS | -29 USD USD | |
| PROFIT/LOSS | -580 USD | |
| TOTAL LOSS | -630 USD |
|---|
DAILY FINANCING CHARGE
You will have incurred 2 days' financing charges for this rolling trade.
This is calculated as follows: f = (s x p x r) / d where:
| f= | daly financing charge |
| s= | your stake (10 CFDs) |
| p= | closing price as determined by Pulse Capital Investments (e.g. 6055.0 and 6075.4) |
| r= | revelant overmight LIBRO rate. PLUS 300 basis ponits for long position,or MINUS 300 basis points, e.g. (4.50% + 3.00%)=1.50% |
| d= | number of days, i.e. 365 for UK shares and 360 for all others |
Long (buy) trade positions are debited the daily financing charge
Short (sell) positions are credited the daily financing charge
So, the finance adjustment will be a credit to your account, equal to:
Day One: (10 x 6055.0 x 1.5%)/365 = £2.49
Day Two: (10 x 6075.4 x 1.5%)/365 = £2.50
I.e. Total financing adjustment = £4.99
DIVIDENDS
If you have an open trade in an index in which constituent companies are due to go ex-dividend, your account will be adjusted to reflect this. The number of index points by which the index will open lower on the day of the ex-dividend(s) is dependent on the weighting of the companies concerned.
Buy trades are credited with the value of the aggregate index point effect times your stake.
Sell trades are debited the value of the aggregate index point effect times your stake.
Example 3: Metal CFDs
The Pulse quote for Gold (XAU/USD) is 1,800 USD/Oz -1810 USD/Oz.
It is June and the price of gold has been soaring recently as speculators push the price higher and higher. You decide the rally still has further to go.
The Pulse Gold listing is based on the underlying spot gold contract.
The face value of gold CFDs is 10 USD.
The commission to trade gold and other metals is 10% of the investment.
You BUY 1,500 GOLD SPOT (XAU/USD) CFDs at 1,800 USD/Oz, and here you should note:
A. That you are tradingper 1,500 CFDs, i.e. if Gold moves to 1,802 that is 2 USD, or equivalent to a $3,000 move on a trade of 1,500 CFDs.
B. That the base currency of the underlying Gold futures market is US dollars, so this is what you will be trading in.
The price has already risen through the $1,804.20 level, and our quote is 1,804.10.
You decide to close your position and SELL 1,500 CFDs at 1,804.10.
This realises a profit of (1,802 – 1804.10) = 2.10 USD x your stake of 1,500 CFDs = $3,150 USD
| In price | 1,802.10 USD | |
| Out Price | 1,804.10 USD | |
| BUY 1500 GOLD SPOT CFDs Investment | 15,000 USD | |
| Commission | 1,500 USD | |
| UNIT PROFIT/LOSS | 2.10 USD | |
| PROFIT/LOSS | 3,150 USD | |
| TOTAL PROFIT | 1,650 USD | |
Example 4: Currencies CFDs
Pulse quote for the GBP/USD CFD is 1.8552 - 1.8555.
On the eve of a Bank of England rates meeting, the sterling/US dollar spot rate (GBP/USD) is trading around 1.8553.
You believe the Bank may well make a surprise hike in UK rates and BUY 200,000 CFDs at 1.8555, expecting the pound to strengthen relative to the US dollar. This is equivalent to buying £200,000.
Our FX CFDs are a special form of CFD which give you exposure to underlying exchange rates BUT they are cash-settled, so they cannot result in delivery of the underlying currency.
NIGHTLY FINANCING CHARGE
Finance adjustments are made to trades held overnight (i.e. after 10pm UK time) on rolling markets.
For trades on currencies, this is calculated as follows: f = (s x p x r) / d where:
| f= | daly financing charge |
| s= | the number of CFDs you hold inthe 2nd currency |
| p= | rolloverr price (the Pulse Capital Investments mid-price at 22:00 UK time that day, say 1.8560) |
| r= | diferential of relevant overmight LIBRO rate of 1st named currency and that of 2nd named currency, here these are 4.50% = .05% differential |
| d= | number of days, i.e. 360 |
If the first currency has a higher interest rate, then you are credited interest for running a long position and debited interest for running a short position.
If the first currency has a lower interest rate, then you are debited interest for running a long position and credited interest for running a short position.
and so here, the adjustment would have been equal to:
(200,000 x 1.8560 x -0.5%)/365 = -$5.08
At 10:45 the next morning the Bank's decision is announced — rates are maintained at their current level and sterling drops. Deciding to close your trade you see that the current quote is 1.8490 - 1.8493 and SELL 200,000 CFDs at 1.8490. A quick way to work out potential profit is to think of the value of one "pip", i.e. for GBP/USD, for 100,000 CFDs each pip has a value of $10
| BUY 20,000 FX CFDs | In price | 1.8555 |
| Out price | 1.8490 | |
| Finance adjusment | 5.08 | |
| TOTAL LOSS | £ 1300 |
|---|
Example 5: .GOLD
The Pulse quote for spot Gold is 927.6 – 928.1.
Unlike Pulse’s Gold futures contract the Spot Gold market enables you to trade a rolling Gold contract without the contract expiring. A position held in the Spot Gold market will be subject to a daily financing adjustment (outlined below).
Example: It has been a very active day in the Gold market as speculators have continued to push up the price. Spot gold finishes the session just off the day’s highs and you believe that there is still much room for further rises.
You BUY 20 CFDs at 927.6, and here you should note:
1. That you are trading “per 0.1” i.e. if Gold moves from 927.6 to 928.6, that is 10 “ticks”’’ or equivalent to a $200 moves on a trade of 20 CFDs.
2. That the base currency of the underlying Spot Gold market is US dollars, so this is what you will be trading in.
By the following day you notice that the price has risen yet further, through the $950 level, and our quote is 950.1 – 950.6.
You decide to close part of your position and SELL 10 CFDs at 950.1.
This realises a profit of (9501 – 9276) x your stake of 10 = $2250.
You leave the remaining 10 to run as you feel that there is still plenty of room for further price increases.
The following day you notice that GOLD has fallen as speculators begin to take profits; our quote is 922.6 – 923.1
You SELL 10 CFDs to close out the position at 922.6
This realises a loss of (9276 – 9226) x your stake of 10 = $500
| In price | 9276 | |
| 1st Out Price | 9501 | |
| Profit taken | 2250 | |
| BUY 2,500 Shere CFDs | 2nd out price | 9226 |
| Loss incurred | 500 | |
| Finance adjustment | 44.13 | |
| TOTAL PROFIT | £ 1705.87 |
|---|
NIGHT FINANCE ADJUSTMENT
s you hold the position overnight, a finance adjustment is made to your account.
This is calculated as follows: f = (s x p x r) / d where:
| f= | daly financing charge |
| s= | number of CFDs (20) |
| p= | closing price as determined by Pulse Capital Investmentes ( day 1 930.6 day 2 941.5 - basis the Pulse quote at 17:00 New York Time) |
| r= | overnight LIBRO rate, PLUSE 300 basis pints for long positions, or MINUS 300 basis points for short positions, e.g.(2.67% + 3.00%) = 5.67% |
| d= | number of days, i.e. 360 for Spot Gold. |
Long (buy) trade positions are debited the daily financing charge
Short (sell) positions are credited the daily financing charge
So, the finance adjustment will be a debit to your account, equal to:
Day 1 (20 x 9306 x 5.67%) / 360 = 29.31
Day 2 (10 x 9415 x 5.67%) / 360 = 14.82
Note: All rollovers and associated finance adjustments are carried out at 10pm London time.
