Commodities Examples
'Buy'
'Buying' US Cotton
Opening the position
You believe cotton prices in the US are set to rise, so you decide to take a position on March NY Cotton ($2.50 Mini Contract).
We quote the market at 7586.5/7611.5. You buy two mini contracts at 7611.5, the current offer price. In order to open your position you need to put down a deposit of $7611.50.
Closing the Position
Your trade proves profitable as over the next couple of days the price of US Cotton soars. One week later we are quoting the commodity at 8410.0/8435.0. You decide to take your profit and close your position by selling your contracts at 8410.0.
Your profit is calculated as follows:
| Profit on trade | |
|---|---|
| Opening level | 7611.5 |
| Closing level | 8410.0 |
| Difference | 798.5 |
| Profit on trade: (2 x $2.5 ) x 798.5 points = $3992.50 | |
*Please note that trading CFDs is a geared investment strategy, carrying a high risk to your capital. Only trade with money you can afford to lose. Please see our Risk Disclosure Statement for more details.
'Sell'
'Selling' Spot Gold
Opening the position
You expect the price of gold to fall. Our quote is 1611.1/1611.6 and you decide to sell one standard contract at 1611.1 (one 100 oz contract equates to $100 per full point). There is no commission to pay on any of our Commodity CFDs.
Closing the position
A few days later, the price of gold has fallen and we are quoting 1550.1/1550.6. You decide to take your profit, buying 1 contract at 1550.6. Your gross profit on the trade is calculated as follows:
| Profit on trade | |
|---|---|
| Opening level | 1611.1 |
| Closing level | 1550.6 |
| Difference | 60.5 |
| Profit on trade: 1 contract x 100 oz x US$60.5/oz = US$6,050 | |
To calculate the net result on the transaction you would also have to take into account interest adjustments. For more information on interest rates, see How Financing Works.
CFDs are leveraged products. CFD trading may not be suitable for everyone and can result in losses that exceed your initial investment, so please ensure that you fully understand the risks involved.