What is a Contract for Difference (CFD)?
Well, in brief, CFDs do share similarities to how we buy a residential property in Malaysia. First, we would place a 10% down payment on the property. Next, we could finance the remaining 90% with a mortgage. Thus, a mortgage is a kind of leverage to homeowners.
So, if let’s say, we want to buy 10,000 shares of DBS at S$ 29.50 per share. First, we can choose to invest S$ 295,000 to buy 10,000 shares. Alternatively, we may buy its CFD where we put an initial margin (down payment) of 10% of the price, which is S$ 29,500 to gain exposure of 10,000 DBS shares worth S$ 295,000.
Pretty cool, isn’t it?
Now, hold onto your horses.
Before embarking into CFDs, it is best for us to first know about its rewards and risks. As such, it is my honour to have invited Mr. Jimmy Ng, CFD specialist from Maybank Kim Eng to share his insights on CFDs. You will learn more about:
- What are CFDs?
- Benefits for Trading CFDs
- How to Calculate Trading Profits / Losses from CFDs?
- Key Risks to Take Note when Trading CFDs