Indices Examples Australia 200

'Buying' the Australia 200 Cash

Opening the CFD position

It is November 2011 and our quote for the Australia 200 Cash is 4142/4143. You think the blue-chips are going to start their recovery and decide to buy two contracts at 4143. (One standard contract is the equivalent of $25 per index point.) There is no commission to pay.

To open your position you supply a deposit of $500 per contract = $1,000. You will then make or lose $50 for every point the sell price rises above or falls below 4143.

Closing the position

Six days later, the Australia 200 Cash has climbed to 4265/4266 and you decide to take your profit. You close your position by selling two contracts at 4265.

Your profit on the trade is calculated as follows:

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.

Of course, had the market moved in the opposite direction, you would have made a loss that may have exceeded your initial deposit.

Use Guaranteed Stops to limit your risk on stock index CFD trades. You specify an absolute level at which your position will be closed should the market move against you.

When you use a Guaranteed Stop a premium is added to your opening price as risk protection. The Limited Risk premiums which apply to individual stock indices are listed in the Contract Details.

The margin requirement for a Limited Risk trade is equal to the amount which would be lost if the Stop were triggered.

Example: Shorting Wall Street with Limited Risk

You want to go short but are concerned about the possibility of a short-term rally.

Opening the CFD position

It is 15 July 2011 and our quote for Wall Street is 12444/12445.8. You decide to sell one contract with Limited Risk protection (one contract is the equivalent of US$10 per index point.) So your position is opened at 12444 (the bid price) minus 4 (the Limited Risk premium, see contract details) = 12440.

Placing the Guaranteed Stop

You decide to put your Guaranteed Stop at 12500. So the most you can lose on your position (excluding interest and dividend adjustments) is:

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.