Re: Contracts for Difference (CFD's)

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Posted by Mark on April 30, 2007 at 12:25:29:

In Reply to: Contracts for Difference (CFD's) posted by Patrick on April 28, 2007 at 23:10:34:

: Hi,

: I downloaded a trial of FM a couple of years ago, but it didn't quite meet my needs e.g. I'm in Australia where we have Dividend Imputation, which I know you know about. Anyway, I've fired up FM again and am taking another look at it. However, I do have a question...

: Do you intend offering support for Contracts for Difference (CFD); or alternatively can you suggest how they might be handled in your current version?

: I don't believe this instrument is offered in the US yet but it is very common in other countries e.g. UK and Australia and is growing at an incredible rate (in Oz, more shares are traded as CFD's than the underlying instrument). And you can certainly trade CFD's for the Dow and NASDQ in other countries if not in the US

: Rather than me try to describe them, if you'e not familiar with CFD's, just Google "What are CFD's"., where you'll discover any amount of information.

: Thanks
: Patrick

Hi Patrick,

I wasn't familiar with CFD's, but I did as you suggested, and read up on them. It sounds like you are buying on margin and are leveraged, so for a small investment, you can get a bigger swing in value. This seems like you can track this with a combination of 2 investments:

1) An investment to track the underlying investment
2) A negative valued cash investment for the margin you owe

For example, if you bought $25,000 worth of Stock_A and paid $2,500 and the rest was margin, you would record:

1) A buy of $25,000 of Stock_A
2) A sell of $22,500 in Margin

Thanks,
Mark
--
Fund Manager - Portfolio Management Software

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