MARNOR INVESTMENT PARTNERSHIP LLP
LET YOUR MONEY EARN YOU THE PROFIT YOU DESERVE
MARNOR INVESTMENT PARTNERSHIP TECHNICAL/CFDs
INTRODUCTION TO CFDs
Technically, Contracts for Differences (CFDs) are an agreement between two parties to exchange the difference between the closing price of the contract and the opening price of the contract.
Like an equity trade, you are able to open and close trades on demand and at market price. Like an option, you are able to leverage your cash and go long or short, so hedging a position you hold elsewhere is also a possibility.
You deposit typically 10% for equity CFDs and 5.0% to 7.5% for index CFDs. You will be required to pay a financing charge (e.g. LIBOR +1.5%) on the outstanding amount if you hold a long position and will receive financing (e.g. LIBOR -2.5%) if you sell a short position. These amounts are pro-rated at annual rates (i.e. daily financing = closing day value of the open position x rate% / by 365 days). If you close your CFD position intra-day, no financing payments are applicable.
Because you are not taking delivery of the underlying shares and have no stamp duty requirement, CFDs can be a favourable alternative to trading equities directly. Currently, typical CFD commissions on the opening and closing trades together will amount to less than the 0.5% required only for stamp duty on UK equities transactions.
There are a number of advantages in trading CFDs over stocks.
There are:-
* No stamp duty (If you buy stocks in the UK you have to pay 0.5% tax on the transaction)
* A high level of leverage with your investment (usually only 10% of the value of the shares)
* No expiry date (Most other derivatives have an expiry date)
* Can go long or short (This allows the partnership to benefit from a falling market as well as a 
rising one)
rising one)* No extra spread (The price quoted is the market price). Spread is explained in spread trading
*Day trade without a minimum deposit & access to wide market
HOW IT WORKS
Basically when we are buying CFDs on a particular share, commodity, index or foreign exchange we are putting down a deposit on the asset. If we are buying 10,000 shares of Vodafone at 100p that would normally cost £10,000. Whereas, if we were buying this on CFDs we woul only deposit 10% which equates to £1000.00.
Now if the stock moves up to 110p and we decide to sell, our realised pofit would be
bought 10, 000 at £1.00 = £10, 000
sold 10, 000 at £1.10 = £11, 000
profit of £1000.00
Therefore we put down £1000.00 and made a profit of £1000.00 this is a 100% profit
This would be a 10% profit if we bought normal shares. Since we would buy the 10000 shares for £10,000.00 and sell it for £11,000.00.
So £1000 make £1000
and £10,000 make the same £1000
THE RISKS
Great reward is not without risk and this is why we make money management the priority. The risk can be high and result in the loss of the initial capital. If the trade went the other way and went down 10p we would realised a lost of £1000.00, a 100% loss.
All trades that we placed will have a stop loss in place to close the position out at a calculated loss, which is normally a maximum of 5% of the total investment capital in the particular trading account.
