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CFD TRADING STRATEGIES
Short term speculation: long or short
CFDs are ideal in taking advantage of both rising and falling stock prices. Investors can open a long or a short position on UK, US and European stocks using a CFD. This is difficult and expensive to do in the traditional stock market and makes CFDs ideal for speculative trading.
Hedging: reduce or remove risk
You may be holding long-term positions in you stock portfolio, which you are concerned about in the short-term. It can be a costly exercise to sell these shares and then buy them back once the market has corrected.
Shorting CFDs in these shares is a much more cost-efficient method of capitalising on a short-term fall in the share price. It is also a tax efficient and cost effective alternative to incurring a tax liability from crystallising a gain, and the other costs associated with the sale and re-purchase of a long-term holding.
Lock in a profit on a physical stock position
Once you have a profit showing on a physical stock position, you can sell or short a CFD in an equal amount at the market price, thereby locking in your profit on the physical position. This can be used extensively for tax management, for example, by locking in profits without crystallising any capital gain. |
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