FX CFD Example - MF Global Futures broker, Futures trading, CFD trading, online Futures trading

FX CFD Example

Anthony believes that the Australian dollar will strengthen against the US dollar.
Anthony buys 100,000 AUD/USD at 0.8225, requiring an Initial Margin of 4%. No commission is charged on this trade, instead, the spread quoted includes the MFGA Spread which is a spread between the exchange / spot rate MF Global receives in respect of its Hedge Position and the Contract Rate it quotes in respect of a Currency Pair / commodity.

Open Long Position

Trade	Buy AUD/USD
Contract Quantity	100,000	AUD 100,000
Contract Rate	0.8225	One Australian dollar buys 82.25 US cents
Contract Value	USD 82,250	Contract Quantity x Contract Rate
Initial Margin	USD 3,290	4% of Contract Value
Initial Outlay	USD 3,290

Because Anthony has held his position overnight, funding interest will be applied to the position. The funding interest rate is calculated based on the difference between the Australian and US interest rates. Since the Australian interest rate is higher than the US interest rate, clients holding a long position in AUD/USD will receive funding interest. The funding interest rate applied is 0.00008, so Anthony receives USD8.

As Anthony predicted the Australian dollar rises against the US dollar. By the end of the business day, the AUD/USD exchange rate has risen to 0.8375. The following day, the US dollar recovers a little, so Anthony decides to take profit. He closes his position at 0.8356, and makes a profit of USD1,310.

Close Long Position

Trade	Sell AUD/USD
Contract Quantity	100,000	AUD 100,000
Contract Rate	0.8356	One Australian dollar buys 83.56 US cents
Contract Value	USD 83,560	Contract Quantity x Contract Rate
Profit/Loss	USD 1,310	Closing Contract Value - Opening Contract Value
Funding Interest	USD 8	0.00008 x Contract Quantity
Total Profit/Loss	USD 1,318	Profit/Loss + Funding Interest
Return on Outlay	40.06%	Total Profit/Loss dividend by Initial Outlay

The total profit on this trade is USD1,318 (reflecting a return of 40.06% on initial outlay), which remains in the USD ledger in Anthony’s account and earns interest until he instructs MF Global to transfer it back to his base currency.

Disclaimer: This website contains general information only and does not constitute financial product advice. Derivative products can be risky and are not suitable for all investors. MF Global Australia recommends customers seek independent advice. A MF Global Australia Product Disclosure Statement (PDS) is available through the website www.mfglobal.com.au and should be considered prior to trading MF Global's derivative products. Investing in derivatives carries a high level of risk to capital, and due to the potential volatility and fluctuations in value, investors may not get back the amount of their original investment. In certain circumstances an investor may be liable to pay a far greater sum, with losses being higher than an initial deposit.