Examples

Buying Balfour Beatty

Opening the position

In early October Balfour Beatty is quoted at 315.6/315.9p in the market, and you buy 2000 shares as a CFD at 315.9p, the offer price, on a Limited Risk basis.

You decide to put your Guaranteed Stop at 300.9p. Should the market move against you, your position would be closed at exactly 300.9p, even if, for example, the share be subject to sharp losses in a short space of time.

So the most you can lose on the position (excluding interest and dividend adjustments) is £300 (315.9p, the opening level, minus 300.9p, the Stop level = 15p: 15p x 2000 shares = £300).

The commission on the transaction is 0.10% or £6.32 (2000 shares x 315.9p x 0.10%) (see Commissions). The Limited Risk premium is also charged when the position is opened. In this case it is 0.3% or £18.95 (2000 shares x 315.9p x 0.3%).

Triggering the Guaranteed Stop

After you have held the position for a few days, stocks in Balfour Beatty fall sharply. In the afternoon they have fallen to 275.8p but your Guaranteed Stop is triggered and your position is closed at 300.9p. You sell 2000 shares at 300.9p. The commission on the transaction is 0.10% or £6.02 (2000 shares x 300.9p x 0.10%).

Your loss on the trade is calculated as follows:

Without the Guaranteed Stop, you would have lost more than you did. Had you not closed until the price fell to 275.8p, your losses would have equalled £8200.

To calculate the overall result of the transaction you would also have to take into account the commission and Limited Risk premium you have paid and the interest and dividend adjustments. These are applied to Limited Risk positions in exactly the same way as to standard CFD positions (see Detailed CFD Example).