What is CFD leverage? CFD’s (Contract For Difference) are identical to leveraging products, like options, but they work in a more simple way. In contrast to regular options, they don’t expire and don’t lose time value.
CFD leverage means trading with a limited investment and a significant amount in shares, indices and raw materials.
CFD leverage: an example
You want to buy 20 Google shares at 750,00 dollars each. Normally you would pay for this total amount 15 x 750,00 = 15000 dollars. If you trade with CFD’s for 20 Google shares on the Plus500 platform, the initial margin is only 10%: 1500 dollars
This means that you can take a position of 15 google shares, with a small investment of 1500 dollars and you will still enjoy the total increase of these 20 shares.
As explained before a CFD is a ‘contract for difference’. So, if Google increases to 1200 dollars and you sell these CFD’s, you will make a 300 x 20 = 6000 dollar profit. Your investment of 1500 dollars has become 7500 dollars. This is how a CFD leverage works: you will get the difference between the opening and closing value of a particular trade, without a whole investing amount.
Want to learn more?
Want to learn more about CFD leverage? Try a free demo-account or open an account right away. With an account you can trade CFD’s for raw materials and on the Forex market.