What are CFDs
CFDs or Contracts for Difference is an agreement between two parties to exchange, at the close of the contract, the difference between the opening price and closing price of the contract, multiplied by the number of underlying stocks specified in the contract. CFDs are traded in a similar way to ordinary stocks and used as an alternative instrument to stock trading. It allows the investors to:
- Gain exposure to stock price movements, without the need for ownership of the underlying stocks; and
- To take long or short positions, instead of paying the full contract value of the underlying position, the investor is only required to place a cash deposit (known as margin) as collateral.
CFDs do not have an expiry date. As long as the investor is able to top up variation margin and interest payment as required, the investor is able to hold the position indefinitely*.
* Please refer to Terms and Conditions Applicable to Contracts for Difference ("CFD Terms and Conditions") for full details.