Profit Margins on cfd trades

[#1]

Hi Guys, Can someone please explain / confirm my thinking. I bought 400 SOLcfd contracts with the view that the price would increase over the short term. which it has from where i bought it. but here is the thing. The break even price is the MTM price + 0.35%. Thus even if the price increases by .25% every day indefinitly I am still looseing money. as the break even is 0.35%. How can one then make a profit trading this instrument if the daily increases are less than 0.35% Any opinions will be greatly appreciated.

[#2]

Interest is charged on your total exposure daily at the JBAR rate. So it should amount to something like 0.03% per day. But remember that is on total exposure, not your original borrowing amount. So your stock needs to move up exponentially faster than that figure to remain in the money.

[prancing_horse]

@johnny, I assume the .35% is the cost of the trade, so if you purchased SOL at 395 your cost to get in would be R1.39 and your daily interest approx 8cents /share/day compounded. If kept for a year your interest per share would be in the region of R30 as

[#4]

Hi Prancing Horse, Many Thanks for your reply. The 0.35% is charged everyday on the total exposure which is R160'000 over 400 CFD's. Which equates to around (R560 / 400 cfds) which is equal to around 140c or 0.35% of Sasols move. IE: the price has to rise by 0.35% everyday, just to break even. Thats highly unfair. Or am I missing something? Everyday I start of -R560, and then like today its a blood bath on my side.

[prancing_horse]

No Johnny, impossible, because that equates to an interest rate of 127.75% p.a. Work with my figures,they will be quite close to the mark.