Corporate Shares

Example #1. Buy Endesa shares with stocks (long position)

Opening position
On April 1st, Endesa is trading at 13.99 (bid) / 14.00 (ask) Euros. You decide to buy 2,000 shares at 14.00 € on that day. Your purchase amounts to 28,000 Euros (14.00 € x 2,000 shares).

Dividend calculation
Imagine that on April 17th, Endesa pays a dividend per share of 0.6 €. As a consequence, you receive 1,200 Euros (0.6 € x 2,000 shares).

Closing position
On May 1st, Endesa is trading at 15.30 (bid) / 15.31 (ask) Euros and you decide to close your position. Therefore, you sell 2,000 shares at 15.30€ and obtaining corresponding profit.

Trade summary

Acciones_de_empresas_1_big

 

 

Example #2. Buy Endesa shares with CFDs (long position)


One of the main advantages that negotiation with CFDs presents, is the possibility of operating on margin. Next you will see an example that also includes the adjustments needed for dividends and interest.

Opening position 
On April 1st, Endesa is trading at 13.99 (bid)/14.00 (ask) Euros.  Imagine you decide to purchase on April 1st 2,000 shares at 14.00€. Your purchase would ascend to 28,000€, which is the result of multiplying 14.00€ x 2,000 shares. In order to open this position you need to deposit 2,800 € (14.00 € x 2,000 shares x 10%), which is the margin required.

Dividends Calculation
When you hold a long position on CFDs, with a Corporate Share as the underlying asset, dividends are credited in your account and in case of a short position they are charged in your account.

Imagine that on April 17th, the company pays a dividend of 0.6€ per share. Therefore, your account is credited with 1,200 € (0.6 € x 2,000 shares).

Closing position
On May 1st, Endesa is trading at  15.30 (bid)/15.31 (ask) Euros and you decide to close your position of 2,000 shares. In order to close it, you sell your 2,000 shares at a price of 15.30 Euros per share and pocket the gains.

Interest calculation
When you hold a long position on CFDs you pay interest and in case of a short position you receive interest.

The interest is calculated on a daily basis, by applying an interest rate on the notional of the trade for the period between the open date and close date of the position.

In this example, if the corresponding interest rate was 3 %, interest payments per day would be 2.34€ [(1/360 x 2,000 shares x 14.00€) x 3%].

Trade Summary

Acciones_de_empresas_2_big


Advantages of this trade:

  • You could magnify your investment, with only 2,800 Euros you had a position of 28,000 Euros;
  • Your return is higher, when compared with traditional investment (using Stocks), since you only needed to deposit a tenth part in order to open a position;
  • You were entitled to receive dividends as if you owned Corporate Shares;
  • You did not have to pay stamp duties or custody fees;
  • You could assess the price of the Corporate Share, using any public information, to check your profit or loss, making the CFDs one of the most transparent financial derivatives.

 

 

Example #3. Sell Telefonica shares with CFDs (short position)

 

One of the main advantages that negotiation with CFDs presents, is the possibility of operating with short positions (short selling). Next you will see an example that also includes the adjustments needed for dividends and interest.

Opening position
In early January, Telefónica is trading at 15.00 (Bid) / 15.01 (Ask) Euros per share. On March 10th, you decide to open a short position by selling 3,000 shares at 15.00 € (bid price) each using CFDs. In order to open this position, you needed to deposit 4,500 Euros, which corresponds to 15.00 € x 3,000 shares x 10 %, the margin required for this operation.
 
Interest and dividends
When you hold a long position on CFDs you pay interest and in case of a short position you receive interest.

When you hold a long position on CFDs, with a Corporate Share as the underlying asset, dividends are credited in your account and are charged in your account in case of a short position.

Interest calculation
The interest is calculated on a daily basis, by applying an interest rate on the notional of the trade for the period between open date and close date of the position. In this example, if the corresponding interest rate was 0.95%, interest receipts per day would be 1.17€ (3,000 shares x 15.00€ x 0.95% x 1/360).

Dividends Calculation
Imagine that on April 3rd, Telefonica pays a dividend of 0.2 € per share. In this case, your account would be charged with 600 € (0.2 € x 3,000 shares).

Closing position
On May 10th, Telefonica is trading at 13.49 (bid)/13.50 (ask) Euros and you decide to close your position of 3,000 CFDs shares at a price of 13.50€ and pocket the gains.
 
Trade summary

Acciones_de_empresas_3_big


Advantages of this trade:

  • You can benefit from a bear market, in our example Telefonica share price went from 15.00 € to 13.50 €, something that is not possible with conventional investment, such as trading Corporate Shares with Stocks;
  • You can multiply the magnitude of your investment. With only 4,500 € you can have a position of 45,000 €;
  • You did not have to pay stamp duties or custody fees;
  • You could assess the price of Telefonica online, using any public information, to check your profit or loss, making the CFD-Stock one of the most transparent financial derivatives.
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