Examples of trading in contracts for difference (CFD)

Mini Dow Jones

An investor bought 1 contract for mini Dow Jones difference at the price of 10401 and sold it at the price of 10720 points. The price difference between opening and closing is 319 points. So, the profit is 5 dollars x 319 = 1595 dollars.

Wheat

You bought 1 CFD contract for wheat at the price of 520 cents per bushel and sold it at the price of 522 cents. The difference is 2 cents. One CFD contains 5000 bushels (like in a standard exchange contract, for example, on the CME Group). So, your profit is 5 000 × 2 cents = 100 dollars.

Long position (purchase)

An investor decides to buy Wheat CFD quoted 515 (bid)/516 (offer), and buys 5 contracts at the price of 516 cents per bushel (let’s recall: 1 contract contains 5,000 bushels of wheat — see specifications).

  • Buy price of wheat is 516 cents
  • Quantity of contracts is 5
  • Value of 5 wheat contracts is 129000 (5.16*5*5000)
  • Margin required is 8000 US dollars (2300*5)
  • Investor freezes only 8000 dollars on the account in order to get control over wheat in the value of 129000 USD

Position closing

Five days later wheat is quoted 525/526 cents per bushel, and the investor decides to close this position by selling an identical set of contracts, namely 5 contracts. The investor sells those at the «bid» price, i.e. 525 cents.

  • Sell price for wheat is 525 cents
  • Quantity of contracts is 5
  • Wheat value is 131250 US dollars (5.25*5*5000)
  • Net profit per the transaction is 2250 US dollars
  • The return is 28% on the capital invested in just 5 days

Short position (sale)

Based on the analysis of the situation, the investor thinks the price for wheat is going to get down and decides to derive profit from that by selling Wheat quoted 533 (bid)/534 (offer) and sells 5 contracts at the price of 533 cents per bushel (let’s recall: 1 contract contains 5000 bushels of wheat — see specifications).

  • Sell price for wheat is 533 cents
  • Quantity of contracts is 5
  • Wheat value is 133250 US dollars (5.33*5*5000)
  • Margin required is 8000 US dollars (1600 dollars per each contract)
  • The investor freezes only 8000 dollars on the account in order to gain control over wheat at the value of 133250 US dollars

Position closing

Two days later wheat is quoted 522/523 cents per bushel, and the investor decides to close this position by buying an identical set of contracts, namely 5 contracts. The investor buys those at the «offer» price, i.e. 523 cents.

  • Buy price for December wheat is 523 cents
  • Quantity of contracts is 5
  • Wheat value is 130750 US dollars (5.23*5*5000)
  • Net profit per the transaction is 2,500 US dollars
  • The return is 31% on the capital invested in just 2 days

By trading mini-lots you can start trading CFDs with a deposit of just 300 USD.

Please note: If in the above examples the price went in the opposite direction, the investor would have sustained a loss instead of gaining profit.