What is a CFD?
Contracts For Difference (CFDs) are specialised and popular Over The Counter (OTC) financial derivative products which enable you to trade on the price movement of financial assets Indices Futures, Commodity Futures, Shares and Exchange Traded Funds, without actually owning the underlying Asset or acquiring any rights or obligations in relation to the underlying asset.. The main benefit of trading CFDs is the flexibility to trade against price movements without actually buying or selling the physical financial assets.
AVA’s CFDs derive their price from the underlying Asset. You can trade CFDs if you believe the price of a financial instrument is likely to go up in value (strengthen) and if you think it is likely to go down (weaken). Your profit or loss in online CFD trading is determined by the difference between the price you buy at and the price at which you sell.
What are the Advantages of CFDs?
- No Exchange fees – You do not own the underlying asset and do not acquire any rights or obligations in relation to the underlying asset. It is a contract between the client and AVA.
- Leverage trading – You need significantly less capital to open a trade in comparison to owning the underlying asset. Leverage is a double-edged sword, of course, as it can significantly increase your losses as well as your gains.
- Initial Margin required and maintenance margin required are the same.
- For many, CFDs are not subject to stamp duty (this is subject to your individual circumstances and jurisdiction and can change).
- The ability to trade a range of instruments from the same trading platform.
What are CFDs Infographic
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