ASX Contracts for Difference (CFDs)

ASX Contracts for Difference (ASX CFDs) are a versatile and powerful investment tool for experienced investors. Unlike over-the-counter (OTC) CFDs, which are contracts traded between you and a provider, ASX CFDs are traded on a regulated public exchange, the Sydney Futures Exchange Limited (SFE) which is a member of the ASX Group of companies known under the brand Australian Securities Exchange.

With CommSec ASX Contracts for Difference you can:

  • Potentially profit from either a rising or falling market, by taking long or short positions over selected Australian shares, indices, foreign currency pairs and commodities.
  • Take advantage of leverage, giving you the chance to reap profits with only a small initial margin.
  • Hedge your existing portfolio.

ASX Contracts for Difference are a competitive and liquid financial instrument. They don't have an expiry date. What's more, once registered, your trades are covered by the Sydney Futures Exchange Clearing Corporation (SFECC), guaranteeing you solid financial backing and the transparency of a regulated market.

But ASX CFDs don't suit everyone. ASX CFDs are risky, as they are a highly leveraged class of financial product. Only experienced investors with a high tolerance for risk should use these products.

ASX CFDs at a glance

  Opening a position Holding a position Closing a position
How it works
  • You open a position by buying or selling ASX CFDs over an accepted share, index, foreign currency or commodity.
  • You pay initial Margin plus brokerage.
  • Your margin requirements are recalculated at the end of each day. You pay or receive Variation Margin.
  • You pay Contract interest on a long position and receive Contract interest on a short position.
  • You pay Open Interest Charge (OIC) on both long and short positions.
  • Depending on the underlying, you may also pay or receive dividends, yields or monetised value of franking credits.
  • When you're ready, you close your position.
  • You pay us brokerage on the trade.
  • You pay or receive the difference between the opening and closing prices.
  • Any Initial Margin remaining is credited to you.
Benefits Get leveraged exposure.
  • Receive any dividends on a long position.
  • Receive interest on a short position.
Enjoy the same capital return as a share owner - without owning the underlying.

 

I can do that!

The strategy.

Tom formed the view that the US stock market was going to experience a correction. He decided to use an ASX CFD to take a short position against the DOW JONES INDUSTRIAL AVERAGE (DJIA) and benefit from his view.

How he did it.

Tom sold 10 DJIA CFDs at US$12,450 each*, holding this position for three days.

The result.

Tom’s view proved to be right. After three days, he closed his short position by buying 10 DJIA CFDs at US$11,770 per contract. After taking interest, brokerage and GST into account, Tom realised a gain of US$6,772.76 — that’s a 137.70% profit on his initial investment.

* You will need to convert Australian dollars into the appropriate currency (in this case, USD) before trading ASX CFDs over foreign indices, currencies and commodities.

Item Amount
Open Short Position
Sell Quantity 10
Price US$12,450
Contract Value US$124,500
Initial Margin 1(Outlay) (US$4,850)
Brokerage (including GST) 2 (US$68.48)
Close Short Position
Buy Quantity 10
Price US$11,770
Contract Value US$117,700
Variation Margin/Profit (Loss) US$6,800
Brokerage (US$64.74)
Open Interest Charge 3 (US$15.00)
Contract Interest 4 US$52.50
Profit (Loss) US$6,704.28
Return on Outlay 137.70%

Assumptions:
1 Initial Margin calculated at US$485 per contract. Assumed position is held over 3 days with Last Settlement Price of US$12,000 on each day. Initial Margin rate is US$485 x Sell Quantity.
2 Brokerage is 0.055%, x contract value, including GST.
3 Open Interest charge rate (1.50%) x number of days contract is held (3) / number of days in the year (360) x Last Settlement Price (US$ 12,000) x Number of Contracts (10) x Units per Contract (1).
4 Contract Interest is Federal Funds Rate (5.25%), x number of days contract is held (3) / number of days in the year (360) x Last Settlement Price (US$ 12,000) x Number of Contracts (10) x Units per Contract (1).

* This example is hypothetical and for illustrative purposes only. CommSec does not specifically recommend the security used in this example and does not warrant that it will be available for ASX CFDs. Past performance is not indicative of future performance. ASX CFDs are speculative products that are highly leveraged and carry significantly greater risk than ungeared investments such as share trading; see the risk disclosure statement in the ASX CFD Client Agreement Form) for details.

The information on this site has been prepared without taking account of the objectives, financial situation or needs of any particular individual. For this reason, any individual should, before acting on the information on this site, consider the appropriateness of the information, having regards to the individual’s objectives, financial situation and needs, and, if necessary, seek appropriate professional advice. A Product Disclosure Statement for ASX CFD or OTC CFD issued by Commonwealth Securities Limited ABN 60 067 254 399 AFSL 238814 is available from www.commsec.com.au and should be considered before making any decision about the product.

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