Bonds Example
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All our Rates and Bonds, are OTC products and are quoted on a forward basis with set expiry dates at which the position will automatically close. There is no commission to pay: all our charges are in the dealing spread.
Buying the Bund
Opening the position
You believe the price of the Bund will rise. You check the real-time price for our German Bund online; on 5 January 2010 the price is showing 12118/12122 and you decide to buy three contracts at 12122.
One contract is the equivalent of €10 per point (effectively a 1% change in the par value).
Closing the position
As you predicted, the price of the Bund rises. You check our current quote on 13 January 2010 and we are making 12223/12227. You close your position by selling three contracts at 12148.
Your profit on the trade is calculated as follows:
Profit on trade
| Closing level | 12223 |
| Opening level | 12122 |
| Difference | 101 |
Profit: 101 points x 3 contracts x €10 per point = €3030
Of course, had the market moved in the opposite direction, you would have made a loss that may have exceeded your initial deposit.
Selling the Bund
Opening the position
You believe the price of the Bund will fall. You check the real-time price for our German Bund online; on 5 January 2010 the price is showing 12118/12122 and you decide to sell three contracts at 12118.
One contract is the equivalent of €10 per point (effectively a 1% change in the par value).
Closing the position
Against your expectations, the price of the Bund rises. You check our current quote on 11 January 2010 and we are making 12170/12174. You decide to cut your losses and close your position by buying three contracts at 12174.
Your loss on the trade is calculated as follows:
Loss on trade
| Closing level | 12174 |
| Opening level | 12118 |
| Difference | 56 |
Loss: 56 points x 3 contracts x €10 per point = €1680
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