A CFD tracking one company's share price, usually priced on the underlying exchange quote with commission charged per side, and carrying the lowest leverage of the CFD classes.
Share CFDs are normally quoted directly from the exchange order book with the firm charging commission rather than widening the spread, which makes the cost comparison with a stockbroker straightforward. Under the retail caps in esma-leverage-caps the maximum is 5:1, so 20% of the position value must be posted.
They handle dividend-adjustment and, through cfd-corporate-action-adjustment, splits and other events. Shorting requires no stock borrow arrangement by the client, though brokers restrict shorting where the underlying is hard to borrow or subject to a regulatory ban.
For anyone outside the share's home country, the position also carries a currency exposure that is settled through a conversion-fee on the result unless the account is denominated in that currency.
Example: 800 CFDs on a EUR 62 share is EUR 49,600 of exposure needing EUR 9,920 at 5:1. Commission at 0.08% per side is about EUR 40 each way, plus financing of roughly EUR 8 a night.
Original diagrams for the ideas on this page. Illustrative, not real market data.
The bid-ask spread. Buy orders sit below, sell orders above, and the gap between the best bid (50.01) and best ask (50.04) is the spread you pay to cross. Bar length shows the size resting at each price.Margin and leverage. A $5,000 deposit can control a $100,000 position, which is 20:1 leverage. Because the loss is measured on the full $100,000, a 2.5% move against you halves the deposit and brings a margin call, and a 5% move uses all of it.
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