Exclusive to IG Markets, see how you can trade an AUD denominated CFD contract to avoid currency exposure.
Opening the CFD position
It’s early in October and our quote for the FTSE® 100 Cash is 5586/5587. You think UK stocks are going to climb higher and decide to buy five mini contracts at 5587 (one contract is the equivalent of £2 per index point). As with all our stock index CFDs, there is no commission to pay.
To open your position, you supply a deposit of £1500 (£300* per contract × 5 contracts). This means you will make or lose £10 for every point the sell price rises above or falls below 5587.
The GBP/AUD exchange rate on the day is 1.75.
Monitoring the CFD position
A week later, the FTSE® 100 Cash has risen to 5662/5663. You believe UK stocks will continue to climb higher and decide to keep your position open.
The GBP/AUD exchange rate on the day remains at 1.75.
Running gross profit on trade:
| Opening level | 5587 |
| Current level | 5662 |
| Difference | 75 |
Your running gross profit in GBP is £3750 (75 points x 5 contracts x £10 per point)
Your running gross profit in AUD is A$6562.50 (£3750 x 1.75)
To calculate the net result you also have to include interest and dividend adjustments. Interest adjustments are applied daily to stock index trades in exactly the same way as to Share CFDs. Dividend adjustments are applied whenever a stock in the relevant index goes ex-dividend. For more information see contract details.
Closing the CFD position
Another week later, the FTSE® 100 Cash has not moved and remains at 5662/5664. You now believe UK stocks will retreat in the near term and decide to close your position.
Over the course of the week, the pound has depreciated against the Australian dollar. The GBP/AUD exchange rate is now 1.58.
Your closing gross profit in GBP is £3750 (as calculated above)
Your closing gross profit in AUD is now $A5925 (£3750 x 1.58)
Due to the new exchange rate, the gross amount made on the trade ($A5925) is less than the running gross profit calculated in the previous week (A$6562.50).
Using AUD denominated contracts to avoid currency risk
Any profit or loss made on the FTSE® 100 Cash will be exposed to the currency rate fluctuation between the pound and the Australian dollar. You can avoid this currency risk with our AUD denominated CFD contracts.
* For Trader Accounts