Opening position
Telstra is trading at (bid/offer) $4.99/$5.00. You want to buy AUD$10,000 (2,000 Share CFDs) worth of Telstra CFDs at the offer price of $5.00 with the view that the share price of Telstra will rise.
| CMC Markets | Share Broker Y | ||
|---|---|---|---|
| Buy Price | $5.00 | Buy Price | $5.00 |
| Margin required(10%) | A$1,000 | Inital Outlay | A$10,000 |
| Commission charge (to buy) |
$10 | Commission charge (to buy) |
$25 |
| Total Outlay | A$1,010.00 | Total Outlay | A$10,025.00 |
Share Broker Y requires an initial outlay that is 100% of the price of 2,000 Telstra shares at $5.00 (A$10,000.00). Because CFDs are a leveraged product, you will typically only need from 10% of the price of 2,000 Telstra Share CFDs (A$1,000) to open the same position with CMC Markets.
The amount of commission charged is significantly lower with CMC Markets. You will pay A$10 commission per trade with CMC Markets compared with A$25 per trade with Share Broker Y.
The total outlay of this transaction with CMC Markets is A$1,010 which is A$9,015 less than Share Broker Y (total outlay of A$10,025) for the same exposure in the market.
Closing position
Telstra price rises to $5.20. Having held the position overnight, you decide to close your position by entering an equal but opposite trade, by selling 2,000 Telstra Share CFDs at $5.20.
| CMC Markets | Share Broker Y | ||
|---|---|---|---|
| Sell Price | $5.20 | Sell Price | $5.20 |
| Gross profit/loss | A$400 | Gross profit/loss | A$400 |
| Total Commission charges (to buy and sell) |
$20 | Total Commission charges (to buy and sell) |
$50 |
| Over night financing: 1 day | $2.08 | Over night financing: 1 day | Zero |
| GST | Zero | GST | $5 |
| Net profit/loss | A$377.92 | Net profit/loss | A$345 |
By closing your position you realise a gross profit of A$400.00. The net profit received from CMC Markets and Share Broker Y is calculated by subtracting commission charges and GST from gross profit.
Your net profit received from CMC Markets is A$377.92. Alternatively, with Share Broker Y your net profit would be A$345 due to substantially higher commission on your trade. Additionally, with Physical shares you will be subject to GST on commissions. CFD commissions are not subject to GST.
Return on Investment
CFDs are a leveraged product so your return on investment (ROI) from this trade using CMC Markets is 37.4%, which is significantly more than your ROI from Share Broker Y – which is only 3%.
Important note: If the price had moved in the opposite direction by 20 cents you would realise a gross loss of A$400 trading with CMC Markets and Share Broker Y.
If you trade Australian Share CFDs with CMC Markets you will be charged a monthly ASX exchange fee of $35 plus GST. However if you trade over $50 worth of commission per month, CMC Markets will not charge you this fee.
