If a Trader deposit £20,000 into CFD Trading Account
CFD v Physical Stock
Buy 10,000 Vodafone (say £2)
- using normal stockbroker, costs are £20,000 (for Voda) + £10-£15 (1 way)trading commission (that's it)...no further charge
- using CFD, trading commission £20,000 x 0.01% = £20 (1 way), £18,000 on leverage x 2.5% overnight financing
If the trader trade for 12 months on CFD using leverage 5 times, 1 year financing cost (excluding trading commission) = £20k x 5 = £100k gross exposure x 2.5% financing = £2,500 (or at least £2,000). Of the £20,000 you initially invested, £2 - £2,500 is paid on financing.
"Short" position, you pay 3 things - trading commissions + borrowing costs + overnight financing.
Without talking about trading profit or loss (as it can go either way), the costs of running the CFD accounts - trading commissions, overnight financing + borrowing cost (if "short")... looks quite expensive... not knowing the fact that if we could ever get a hedge fund job, or make it to the end.
I am sure ITPM will get a cut on trading commissions + god know what + mentoring fees. Looks easy money to me.
Depends on how you view the above, however, "conflict of interest" matter is quite evident to me (on a personal opinion).
