Mus/SK12 Jun 2008 11:01
Nope i haven't used it but Barclays wanted me to after many calls. CFD's work like a loan where you only pay 10% deposit and pay a percentage daily on the rest.
So for instance ... if a company was £1 a share and you had a CFD for 10,000 shares you pay for 1,000 - so £1,000 and a percentage on the rest. Currently taking out a CFD for that amount is approx £2.3 per day.
Now you can decide to go Long or Short on a CFD. if you go Long you are betting that the SP will rise. So say for example you bought at 10k at £1, paid £1,000 up front and held the shares for 20 days. Say in 20 days the share doubled. Now if you had done things the old fasioned way your £1,000 would be worth £2,000 20 days later. But if you had opened a CFD for 1,000 and closed it 20 days later you would get the difference between the buy and the sell ... so you would get £10,000 - (20 days at £2.30)
Now if you open a short CFD you actually sell the shares instead of buying them. So if you had a short CFD for 10,000 £1 shares and the shares dropped to 50p in 20 days you would get the difference which is £5,000 - (20 days x £2.30). Just think of a short CFD as the other way round to normal buying. You SELL at £1 and BUY at 50p ... but instead of making a 200% you make 50% as it has halved instead of doubled.