Reading a CFD contract specification

CFD Foundations · CFDs Trading Guide

A familiar market name does not guarantee familiar contract economics. Read the specification before trusting the quantity shown on a trading ticket.

Identify the unit

One contract can represent one share, a fixed value per index point or a quantity of a commodity. Record the minimum size and size increment. A displayed quantity of five is meaningless until its multiplier is known. Distinguish dollars from cents, ounces from kilograms and a currency base amount from the account currency.

Write the exposure calculation

If an index trades at 4,800 and one contract is worth $2 per point, three contracts represent $28,800 of notional exposure. A 15 point move changes their value by $90. At a hypothetical 5% margin rate the initial requirement is $1,440. These are three different quantities: exposure, sensitivity and collateral.

Read the lifecycle rules

Check market hours, holidays, expiry, settlement method and how the provider handles a suspended underlying market. Find the funding cutoff and whether a contract rolls automatically. A continuous chart can hide an expiring instrument. Also record dividend treatment, borrowing charges, currency conversion and any minimum stop distance. Terms can differ even within one provider.

Check size dependent conditions

Margin can increase across position tiers or ahead of events. The first few contracts may not carry the same requirement as a larger position. Save the current specification with the trade record and verify it again before adding exposure. If a key field is unclear, the calculation is incomplete and the trade should remain a research idea.

Try it yourself

An index is quoted at 6,200. Two contracts are worth €3 per point. Find notional exposure and the loss from a 25 point adverse move before costs.

Show the worked answer

Notional exposure is 6,200 × 2 × €3 = €37,200. The price loss is 25 × 2 × €3 = €150. Conversion into another account currency is a separate calculation.