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• New to CFDs
• Share CFDs
  • Intro
  • Contract Specifications
  • Corporate Actions
  • Commission
  • Financing Charges
• Commodity CFDs
  • Intro
  • Contract Specifications
• Energy CFDs
  • Intro
  • Contract Specifications
• FAQ
• Are CFDs suitable for you?

Going Short (Selling)

Contracts For Difference are not complex and not expensive to trade. You do not need to invest a lot of capital and you could benefit from a rising and falling market. Trading CFDs carries a higher degree of risk than trading shares because CFDs are a leveraged product. However, you can minimise the risks by familiarising yourself with this market to help you make informative decisions.

How to trade CFDs?

Let's assume your research has indicated to you that Intel (INTC) shares are overpriced and you decide to sell 200 Intel (INTC) shares through CFDs. They are quoted at $33.90/33.94 and you sell 200 shares at the bid price of $33.90 as a CFD.

To open this position you will need $343.00 (Margin + Commission) available in your trading account. When the trade is closed, the funds used for margin purposes will be credited back to your account. Commission charges are not paid back.

Overnight Financing

Overnight financing is applied each time you leave your position open until after the end of the trading session. Financing is calculated by using the USD Libor rate (for US Stocks) and the closing price of the share.

For example: The overnight USD Libor rate is 0.174%, Alpari (UK)'s fee is 2.25% and the closing price of the Intel shares is $33.40. So, your trading account will be adjusted as follows:

Number of CFDs X Closing Price X Interest/Days in a calendar year (US)
= 200 x $33.40 x (0.174% - 2.25%) / 360 =
= -$0.38

When you leave your position open from Friday to Monday, the credited amount will be three times higher. Both long and short CFD positions are debited due to financing charges.

Closing a position

Seven days after opening your position Intel shares are quoted at $29.97/30.00 and you decide to close the position by buying 200 Intel shares at the ask price of $30.00 as a CFD.

At the end of the trade you have a 225.46% return on your initial investment.

Please note that if your account is in GBP, EUR, CHF or JPY, all calculations will be converted from USD to your base account currency at current market exchange rate (as per Alpari’s prices). This is also the case if you trade FX with Alpari (UK). Also, please note that if you trade UK shares, the overnight financing rates will apply to the GBP Libor rate rather than USD Libor rate. For European shares, Euro Libor rates will be used. For more information on global Libor rates.

Risk warning: This example shows a favourable outcome. If the share price had moved against you, you would have realised a loss instead of a profit. In the above example, if you had bought 200 Intel CFDs, you would have realised a $774.66 loss.

Find out how to open a long position.

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