CFD
– Contracts for Difference
What is Contract for difference or CFD?
Contract for difference (CFD) provides the means for
traders to trade in different markets using flexible strategies,
which is surprisingly done at a fraction of capital required by the
traditional trading. As the name reads it's a contractual agreement
between two parties to settle the difference between the closing
price and opening price at the close of contract.
What are the features of CFD?
Features of CFD are as follows :
- Underlying Investment Product : CFDs are underlying products and their prices track the underlying products closely.
- Portfolio Diversification : Customers can diversify their shares and CFD portfolio with shares from Singapore, Hong Kong, Malaysia and United States or with Indices from Singapore, Hong Kong, Japan, Taiwan and United States.
- Short Position : A CFD allows a customer to take a position on a share or an index without actually having to buy and sell the shares themselves. Therefore, CFD Customers can take short positions and not be limited to the T+3 days contra period or the need to engage in SBL.
- Leverage : As CFDs are leveraged products and traded on margin, customers only need a small percentage (as low as 5% for World Indices CFD and 10% for Equity CFD) of the total contract value to establish a position.
- 30 Calendar Days Contract Period : Each CFD Contract has a contract period of 30 calendar days. Customers can choose to close the contract any time before it's expiration on the 30th Calendar day. If not contracts are not closed within these 30 days, they will automatically get renewed based on the market closing price of the underlying product on the 30th calendar day.
- Sophisticated Trading Strategies : Customers have the added ability to protect their existing shares portfolio against adverse market conditions by using CFDs to hedge their exposure via stra tegies such as pairs and spread trading.
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