Contracts for Difference are 'over-the-counter' contracts that allow you to diversify and hedge your portfolio. Exploit market opportunities to maximise returns on your investment easily, and with a minimal capital outlay.
A Contract for Difference (CFD) mirrors the performance of shares or an index, giving you the benefit of anticipated price increases or falls without you having to physically own shares. This makes them an excellent vehicle for short-term trading strategies. CFDs are not listed instruments, but are traded as 'over-the-counter' contracts between you and PSG Securities Ltd, as your stockbroker.
Trading Contracts for Difference
A CFD contract is equal in value to a standard quantity of a specific underlying asset, usually a listed share. Generally, one CFD contract is equal to one underlying share. But you do not have to pay the full price of the underlying share – you only need to pay enough money into your trading account to cover the initial margin. This means that you get more market exposure than you're paying for.
- Each new position opened needs to have a minimum cost value of R25 000, which requires a R3 750 (15%) initial margin deposit on a Top 40 stock, and a R4 375 (17.5%) initial margin deposit for Top 41 - 100 stocks.
- You only need enough money in your CFD trading account to cover this initial margin. This means that you can effectively release capital tied up in equity holdings.
- A 'long' position involves buying CFDs to sell at a later stage, if you think share prices will rise.
- A 'short' position involves selling CFDs to buy back at a later stage, if you think share prices will fall.
- Your initial margin is always kept separate and cannot be withdrawn from your CFD trading account.
- CFDs are settled at the close of the contract period. You will then receive or have to pay in the difference between the opening price and the closing price of the share specified in your CFD.
- PSG Wealth hedges all our CFD trades in the market through a direct trade in the underlying share.
CFD transactions are entered into on a principal-to-principal basis. CFDs are excluded from 'intermediary services' as defined in Section 1(1) of the FAIS Act and are not regulated in terms of the FAIS Act.
List of available Contract for Difference contracts
Click here to view the list of available CFDs.
Trading CFDs can be very profitable, but involves significant risks – the biggest being that you can lose more money than you started with. CFDs require a high risk appetite, time to watch the markets and expert knowledge on markets and trading. You should not trade CFDs if you do not have this knowledge, or are an inexperienced trader.
Click here for the Contracts for Difference Key Information Document.
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