Share Examples | Share Trading Guide

'Buying' Singapore Airlines

Trade at the guaranteed market price and pay just an initial deposit to open your position, plus a small commission. It's that simple...

Opening the position

On the date in question you decide to open a long position on Singapore Airlines. The market price is 10.30/10.32. You go long on 1500 shares at $10.32, the offer price.

The margin required to open the trade is 10% or $1548. The commission on the trade is 0.1% (or $15 minimum commission), so in this case it's $15.48.

The market price falls throughout the day, but you hope it will rally the following day. You decide to hold your position overnight.

Interest adjustments

Interest adjustments are calculated daily, by applying the relevant interest rate to the daily closing value of the position. The annual interest adjustment for a Singapore dollar denominated share such as Singapore Airlines is found by adding the latest one-month SIBOR (Singapore Interbank Offered Rate) to the financing fee.

On the date in question, SIBOR was at 0.44%, so the annual applicable interest rate on your Singapore Airlines position, assuming a financing fee of 2.5%, would be 2.94%:

The closing price is $10.16, which gives you a closing value of $15,240. The annual interest on $15,240 would be $448.10, which creates a daily interest debit of $1.23 ($15,240 x 2.94% / 365).

Dividend adjustment

When you hold a long position and the share goes ex-dividend, the dividend value is credited to your account. In this example there was no dividend, but if there had been, and the amount of the net dividend was $1 per share, $1500 would have been credited to your account (1500 shares x $1 = $1500).

Closing the position

Despite your prediction, Singapore Airlines continues to fall the following day. The market price reaches 9.89/9.91. You decide to cut your losses and close your position. You sell 1500 shares at $9.89, the bid price. The commission on this transaction is 0.1% or $15 (min. commission).

Your loss on the trade is calculated as follows:

Gross loss on trade: $0.43 x 1500 = $645

Calculating the overall result

To calculate the overall loss on the transaction you also have to take account of the commission you have paid and the interest and dividend adjustments. In this example, as you only held the position for one day, you are debited a total of $1.23 interest.

The overall result of the trade is a loss, calculated as follows:

Please note that trading CFDs carries a high level of risk to your capital. Please see our Risk Disclosure Statement for more details.

'Selling' Singapore Airlines

For the active trader, stock markets have one major disadvantage: the exchange’s regulations may restrict or bar short-selling of some or all shares.

When you trade CFDs it is just as simple to go short as it is to go long.

Opening the position

On the date in question, you decide to open a short position on Singapore Airlines. The market price is 10.30/10.32. You go short on 1500 shares at $10.30, the bid price.

You supply a deposit of 10% or $1545 to open the trade. The commission on the trade is 0.1% (or $15 minimum commission), so in this case it is $15.45.

The market price falls throughout the day and you believe it will fall further tomorrow. You decide to hold your position overnight. At the end of the day, your account is adjusted to reflect interest and dividends.

Interest adjustments

Interest adjustments on short positions are calculated daily in relation to the latest one-month interbank offered rate of the currency in which you are dealing. They also incur a financing fee.

Unlike long positions, interest adjustments on a short position can appear on your account as either a debit or a credit, because the financing fee is subtracted from, rather than added to, the interbank offered rate when calculating interest adjustments.

Therefore, if you have a position on a Singapore dollar denominated share, and SIBOR is greater than your financing fee, the adjustment appears on your account as a credit; conversely, if SIBOR is less than your financing fee, the adjustment appears on your account as a debit.

On the date in question, SIBOR is at 0.44%, which, assuming a financing fee of 2.5%, means that the adjustment will appear as a debit:

Your account is debited at an annual rate of 2.06%. The closing price on the day is 10.16, which gives your position a closing value of $15240. The annual interest adjustment on this value would be $313.94, which creates a daily debit of $0.86 ($15240 x -2.06% / 365).

Dividend Adjustments on Short Positions

When you hold a short position and the share goes ex-dividend, the dividend value is debited from your account. In this example there was no dividend, but if there had been, and the amount of the net dividend was $1 per share, $1500 would have been debited from your account (1500 shares x $1 = $1500). Overall, you do not lose in this situation as the market price of the share will also fall when dividends are paid out.

Calculating the Profit/Loss

The gross profit or loss of the trade is a profit, calculated as follows:

Gross profit on trade: $0.39 x 1500 = $585

To calculate the overall profit on the transaction you also have to take account of the commission you have paid and the interest and dividend adjustments. In this example, as you only held the position for one day, you are debited a total of $0.86 interest.

The overall result of the trade is a profit, calculated as follows:

Please note that trading CFDs carries a high level of risk to your capital. Please see our Risk Disclosure Statement for more details.