Example: Buying Westpac Banking Corp
Trade at the market price and pay just an initial deposit to open your position, plus a small commission. It's that simple...
Opening the position
On 30 September 2008 our quote for Westpac is $21.80/$21.81. You believe Westpac will start their recovery and decide to buy 1,000 shares as a CFD at $21.81, the offer price. Your initial outlay is just 10% x 1,000 shares x $21.81 = $2181. The same outlay with a regular stockbroker would only give you exposure to the performance of 100 shares.*
Our standard commission rate on this transaction is just 0.1% or $21.81 (1,000 shares x $21.81 x 0.1%) (see Contract Details). Active traders can reduce this commission to just 0.08% by using our Volume Discount offer. While your position remains open, your account is debited to reflect interest adjustments and credited to reflect any dividends.
Closing the position
A few days later, on 2 October 2008 Westpac has climbed to $24.05/$24.06 in the market and you decide to take your profit. You sell 1,000 shares at $24.05, the bid price. The commission on this transaction is 0.1% or $24.05 (1,000 shares x $24.05 x 0.1%).
Your gross profit on the trade is calculated as follows:
Profit
| Closing level | $24.05 |
| Opening level | $21.81 |
| Difference | $2.24 |
Profit: $2.24 x 1000 = $2,240
To determine the overall or net profit on the transaction you would also have to take into account the commission and interest paid and any dividend adjustments that have been paid. The Detailed Example includes these calculations.
*Please note that trading CFDs is a geared investment strategy, carrying a high risk to your capital. Only trade with money you can afford to lose. Please see our Risk Warning for more details.