How can you take advantage of these potentially attractive share price moves?
Whether you see UK stocks going up or down for the remainder of the year, tradable opportunities will present themselves regularly. We’re here to help you weed them out and capitalise on them. Accendo Markets can help you increase your profit potential with the use of leveraged instruments such as CFDs, a flexible alternative to traditional shares that is currently exempt from UK stamp duty.
CFDs: Like shares, but more flexible
Figure 1: Buying 1,450 shares in British Land @ £6.90 requires an outlay of around £10,000 plus commission (box above left), while the same exposure via a CFD requires about £500 plus commission (see above right). If a trader invests in British Land, one would assume she believes the share price is likely to move in her favour. After considering the ‘worst case scenario’ and assigning funds to cover it, the trader may conclude there’s little point in exposing the full £10,000 to the BLND shares – some of that capital could be put to good use elsewhere in the markets.
CFDs are leveraged instruments, but you don’t have to use the leverage
If you had, say, £10,000 to invest in the stock market, you could deposit that amount into a share dealing account and purchase shares in a company. You would pay commission to open the position, 0.5% in stamp duty and the full £10,000 will be tied up in your chosen shares with any profit or loss based on that exposure.
The same £10,000 worth of exposure can be secured with a CFD for a fraction of the initial outlay thanks to leverage, with the risk and reward the same as if £10,000 worth of traditional shares were held. But should you not be interested in leverage, you can always treat CFDs like shares. Simply deposit £10,000 into a CFD trading account and take the equivalent CFD position which will tie up just £500 (note that overnight financing costs will still apply). The remaining £9,500 is not tied up, so you can use some of that to take advantage of another short-term opportunity elsewhere, or simply leave it on the account to support any losses. Best of all, using a CFD means you pay no stamp duty!
What’s your view?
Think shares will rise? Take a long position by buying CFDs (buy low, aiming to sell high). Think they’ll fall? Take a short position by selling CFDs (sell high, aiming to buy low). For a more detailed rundown of CFDs, their mechanics, associated costs and some trading scenarios click here.
