FAQs/span>

Is there a minimum opening contract value?

In principle there is no minimum opening contract value and you can execute trades at any level, although in practice in order to get the most out of the leverage effect that CFDs provide the normal smallest contract value for CFDs is around £10,000.

Is there maximum opening Contract Value?

Only the cash in your account available to meet the Margin requirement and the ability of the broker to deal in the underlying shares limits the maximum Contract Value.

What markets can I trade on?

Twowaymarkets provides trades on a huge variety of products from all major financial centres of the world, including stocks, indices, sectors, treasuries.

What are the advantages of trading CFDs?

The advantages of trading CFDs include the ability to go long and short, the ability to place long and short term trades, instant execution, leverage and tight spreads.

How does Margin work?

As a holder of a long or short CFD you do not pay the full underlying value of the contract. However, you are required to deposit margin as collateral known as initial margin. Initial margin is calculated as a percentage of the full contract value and the rate varies according to the market capitalisation and volatility of a particular share. For example if the initial margin is set at 10% you can go long or short of a CFD worth £100,000 and deposit just £10,000, gaining ten times leverage.

How is the margin requirement calculated?

Simply multiply the price by the amount of your stake. Multiply this by the initial margin and this is the amount of margin required to hold your position. The margin requirement for single stock trades is calculated on a percentage basis of the notional value of the position. On Stocks the margin requirement is no more than 10% of the value of your trade, most commonly 5%.

What is the difference between a deposit requirement and a margin requirement?

A deposit requirement and a margin requirement is essentially the same thing - the amount of equity you need to open or hold a position.

What are the tax implications of trading CFDs?

Whilst they are exempt from stamp duty, any profits on CFDs may be subject to CGT (Capital Gains Tax) but losses may also be offset against CGT.

How long can I hold a CFD?

There are no expiry dates on CFDs, as a result you can run a position, long or short, for as long as required.

What are the costs?
  • Commission

    Commission is charged on either side of the contract, as a percentage of the total contract value. There are no hidden costs and you deal at the market price as we do not widen the spread of the share. Twowaymarkets is committed to offering a competitive commission rate which includes all the advice and monitoring you require.
  • Financing

    Clients pay interest on the contract value of a long CFD. Interest is charged at a percentage over LIBOR (LIBOR is the London Interbank Offered Rate and is linked to base interest rates).

    Clients holding short CFD contracts receive interest on the cash that the sale of the underlying stock would have generated. This is similarly paid at an agreed rate under LIBID (London Interbank Bid Rate).

    For example, If a client was paying a long CFD funding charge of perhaps 2% over LIBOR and if LIBOR was 4%, the client would be paying a funding rate of 6% per annum. If the total contract value was £100,000 the funding charge would be around £16 for every day the contract was maintained (£6,000 divided by 365). This amount would be debited daily from your CFD account. The funding charge is only incurred if the position is held overnight. These amounts will be credited or debited on the next trading day.

Warning: Trading Contracts for Differences (CFDs), Futures and spread betting carries a high level of risk to your capital, and is not suitable for all investors. Only speculate with money you can afford to lose. Trading or placing any bets can result in consumers incurring liabilities in excess of their initial stake. Please ensure you fully understand the risks, and seek independent advice if necessary.

Twowaymarkets Ltd is a company authorised and regulated by the FSA to provide advice on spreadbetting, CFDs, futures, options and rolling spot foreign exchange.

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