CFD (Contract For Difference) Dividend Adjustments

Example 1: A PROFITABLE LONG CFD TRADE

Opening the position

You purchase 10000 shares of TLS at the price of $3.58.
The Transaction calculation is as follows:
10,000 x $3.58 x 10% = $3580 Margin Requirement
Commission = 10,000 x $3.58 x 0.125% = $44.75
Whilst the position is open your account is credited for dividend payments and debited for financing rates if you hold the position overnight.

Interest Adjustment

If you hold the position for several weeks you will be charged the daily financing rate. At 7.5% this equates to (35,850 * 7.5%)/365 = $7.36 per day as a fixed example. If the interest rate is calculated on the closing price of the underlying share then the daily interest amount payable will be different since it is linked to the closing price of the share.

Dividend adjustment

If the position has been open for several weeks and a dividend falls due, the amount will be applicable to your holding. If each TLS share pays a dividend amount of 5 cents then your account will credited 10,000 x $0.05 = $500.0 at the time of the ex-dividend date

Profit
If you hold the position for 60 days and receive the dividend then the profit calculations comprise the following transaction costs:
Initial Purchase Price: $3.58
Selling Price $3.84
Difference = $0.26

Profit on Trade = $0.26 x 10,000 = $2600

Total Result of Trade.
Profit on Trade = $2600
Total Commission = $44.75 + $48.00 = ($92.75)
Interest Calculations = ($441.60) (based on average calculations)
Dividend Payment = $500.00

Net Profit on Trade= $2600 + $500 - $441.60 - $92.75 = $2565.65

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Example 2: A Profitable Short CFD Trade

You decide to sell 10,000 share CFD’s in Telstra anticipating the market to fall.

Your sell price is $3.58.
Margin = 10,000 x $3.58 x 10% = $3580
Commission = 10,000 x $3.58 x $0.125 = $44.75

When you take a short position your account is credited to reflect any interest adjustment and debited to reflect any dividends. The interest calculation is based on the daily closing value of the position. In the above position, on a closing price of $3.58 and a payable interest rate of 3.5% this would be ($1253/365) = $3.43 daily.

After holding the position for 60 days you decide to liquidate the position. During the holding period a dividend falls due. In the case of short positions, you are required to pay the dividend. At a dividend rate of $0.05 per share, you will be liable for $500 (10,000 x $0.05).

Profit

Opening level $3.58
Closing Level $3.05
Difference $0.53
Profit on the trade: 10,000 * $0.53 = $5300

Result of the Trade
Profit on the Trade: $5300
Interest: $205.80 (average payable)
Commission: $44.75 + $38.125 = ($82.875)
Dividend Payable: ($500)

Total Profit on the Trade = $5300 + $205.80 - $82.875 - $500 = $4922.925


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