Futures trading example
Suppose the current market level of US Crude – our WTI market – is £6500. We’re offering a sell price of £6497 and a buy price of £6503 due to the spread of six points, which we wrap around the underlying level.
You think the market will rise and decide to buy ten ‘Oil – US Crude (£1)’ futures CFDs. Each is worth £1 per point of movement, and expires at the end of the month. As CFDs are leveraged, you’ll only have to put down a 10% deposit to open this position. In this example, you’ll deposit £6503 for a position worth £65,030 [(6503 x 10 futures CFDs x £1 per point) x 10%]. Please note, however, that while leverage can magnify your profits, it can also amplify your losses.
Some of our oil futures CFDs are quoted in US dollars. In these cases, your profits or losses will be realised in dollar terms, and then converted into pounds at the prevailing rate of exchange
At the end of the month, the price of oil has risen by 50 points, up to 6550 – with a sell price of 6547 and a buy price of 6553. You decide to close your trade. As the price has risen, you’ll make a profit of £440 [(6547 – 6503) x 10 contracts x £1].
However, if the price of oil had declined by 20 points, you would have lost £260 [(6477 – 6503) x 10 contracts x £1] = -£260.
