CFD trading mimics share trading with the exception that in a contract for difference, you actually don't own the underlying asset, unlike company shares, where you do. This is what we call the CFD stock market for trading, and it is definitely a great stocks trading alternative.
What you are essentially doing with CFD trading is buying a contract between yourself and the CFD provider that, depending on your position as (either 'Short Sell' or 'Buy Long');, will have an entry price when entering a trade, and an exit price when clearing out your trade with an equal opposite position.
One of the key differences between trading a CFD long vs buying a security is that you can enjoy larger leverage features. Contracts for difference are traded on margin, meaning there is no need to tie up the full market value of purchasing the equivalent stock position. This also allows traders to open larger positions than their capital would otherwise allow, but having said this, there is also leveraged share trading available as well, where traders usually have lower leverage capability.
A dividend is declared when a company pays out money to investors. It is paid on a per outstanding share basis to stock holders. The more shares you own, the more you will receive in dividends.
For derivatives traders, when a company declares a dividend, if you are long that share, you will be credited with the dividend. If you are short, you pay the dividend. This happens before the market opens on the ex-dividend date.
The ex-date is that day on which if you buy the stock you are no longer entitled to receive the dividend. The share price of a company will drop on the ex-dividend date to compensate for the fact that the company is now worth less – after all, it just parted with a large pool of cash. However, if you have an open trade on the stock, then the dividend will off-set this. Such falls in price usually mirror the dividend paid out.
Once a dividend has been declared, that company becomes ex-dividend – to be paid, you must have an open long position on that company on the day before the ex-dividend date.A dividend is declared when a company pays out money to investors. It is paid on a per outstanding share basis to stock holders. The more shares you own, the more you will receive in dividends.
For derivatives traders, when a company declares a dividend, if you are long that share, you will be credited with the dividend. If you are short, you pay the dividend. This happens before the market opens on the ex-dividend date.
The ex-date is that day on which if you buy the stock you are no longer entitled to receive the dividend. The share price of a company will drop on the ex-dividend date to compensate for the fact that the company is now worth less – after all, it just parted with a large pool of cash. However, if you have an open trade on the stock, then the dividend will off-set this. Such falls in price usually mirror the dividend paid out.
Once a dividend has been declared, that company becomes ex-dividend – to be paid, you must have an open long position on that company on the day before the ex-dividend date.
Buy trades will receive an amount calculated as follows:
Dividend Adjustment = stock dividend declared x lots x contract size
Sell trades will be charged an amount calculated as follows:
Dividend Adjustment = stock dividend declared x lots x contract size
A client is long 25 CFD’s of Amazon and a $1.40 dividend has been declared. If a client holds an open position until the ex-div date they will receive the dividend which equates to a credit of $35.00 (25*$1.40=$35.00).
A client is short 25 CFD’s of Amazon and a $1.40 dividend has been declared. If a client holds an open position until the ex-div date, they will pay the dividend which equates to a debit of $35.00 (25*$1.40=$35.00).
CFD Stocks have a fixed leverage independent of your account’s leverage.
You can right-click on any CFD Stock symbol on market watch and see the margin percentage by clicking on specifications.
You can trade CFD Stocks on all LCM account types and platforms including the Desktop trading platform, Mobile trading apps for iOS and Android and Webtrader.
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