Finspreads miniCFD Centre

Cost comparisons
miniCFDs v conventional broker

An investor believes that Marks & Spencer shares will go up in the short-term based on a trading announcement and has £3000 to invest. The example below is a comparison of what might happen if you invested £3000 in a miniCFD position or bought shares in the traditional manner through a stockbroker.

miniCFDs

Traditional Shares

Opening Trade

Price of M&S

£3.00

£3.00

Number of Shares

10,000

1000

Contract Value

£30,000

£3,000

Opening Commission

£75 (0.25%)

£30 (1%)

Stamp Duty

-

£15 (0.5%)

Initial Margin Required

£3000*

£3000

Total monies to open position

 

£3,075
£3,045

* This figure represents the initial margin for M&S £3000 10% of share price multiplied by the number of shares.


M&S shares rise in value


Subsequently, M&S shares rise in value and you sell your holding at £3.30.

miniCFDs

Traditional Shares

Closing trade

Price of M&S

£3.30

£3.30

Number of Shares

10,000

1,000

Contract Value

£33,000

£3,300

Closing Commission (0.25%)

£82.50 (0.25%)

£33 (1%)

Overall profit/loss calculation

Your closing Contract Value

£33000

£3300

Less your opening Contract Value

£30000

£3000

Profit on Contract Value

£3000

£300

Less Stamp Duty

-

£15

Less Opening & Closing Commission

£157.50

£63

Your profit

£2842.50

£222


Were the shares to move against you, and fall to £2.70, your loss would be similarly magnified. Indeed, you could lose more than your initial deposit.

The similarities and differences of trading with miniCFDs and a stockbroker:

1. Price the bid/offer spread is the same for miniCFDs as it is with the broker


2. Commission miniCFDs commission is generally much lower than with brokers


3. Stamp duty stamp duty for purchase of UK shares is charged at 0.5%. As you are trading a derivative, a miniCFD, and not buying the shares there is no stamp duty to pay.


4. Capital Gains Tax in both cases there is capital gains on profits and similarly you can off-set losses.


5. Leveraged trading most stockbrokers will expect full funds to be lodged with them to cover any purchase. With miniCFDs you only have to cover an initial margin (the deposit required to place a trade). For most FTSE 100 shares the initial margin is just 10% of your trade size. You may have to pay more if your position moves against you.


6. There is an overnight financing charge for miniCFDs this is credited or debited to your account depending on whether you hold a short or long position.


7. Position Time like shares, you can hold your position for as long as you like.


8. Going short (selling) miniCFDs allow you to go short of a share and providing your judgement is correct, you can profit if the price goes down (conversely, if your judgement is incorrect, you would lose money.)


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miniCFD trading carries a high level of risk to your capital. Only speculate with money you can afford to lose. miniCFD trading can be very volatile. Prices may move rapidly against your interests and resulting losses may require further payments to be made. miniCFDs trading may not be suitable for all customers; therefore ensure you fully understand the risks involved, and seek independent advice if necessary.

 

Mini CFD Centre
  Welcome
  What is a miniCFD?
  Cost comparisons
  Benefits
  Trading academy
  How do I trade?
  Maximising profit minimising risk
  Why trade with miniCFDs?


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