Sectors example
Trading sector CFDs gives you the opportunity to profit from sector-specific trends. The example below takes you through a sector trade.
'Sell'
'Selling' retailers
Following sharp rises due to positive sales figures over Christmas by some of the big department stores, you believe the UK Retailers sector is set to experience a pullback, and that the sector’s price will fall.
Opening the position
Our price for the Retailers sector stands at 1796-1804 and you 'sell' one contract (the equivalent of £10 per index point) at 1796, the bid price.
On a Trader Account, you need to put down a deposit of 5% to open the position, calculated as 1796 (opening level) x £10 per point x 5% = £898.
Closing the position
By late January our price for Retailers has fallen to 1657-1665 and you decide to take your profit by 'buying' one contract at 1665.
Your profit on the trade is calculated as follows:
| Profit on trade | |
|---|---|
| Opening level | 1796 |
| Closing level | 1665 |
| Difference | 131 |
| Profit on trade: 131 points x 1 contract x £10 per point = £1310 | |
To calculate the overall result you will also have to include interest and dividend adjustments.
Interest adjustments are applied daily to sector trades in exactly the same way as to share CFDs. Dividend adjustments are applied whenever a stock in the relevant index goes ex-dividend.
For more information see the sectors contract details.
Of course, had the market moved in the opposite direction, you would have made a loss that may have exceeded your initial deposit.
'Buy'
'Buying' retailers
Following sharp rises due to positive sales figures over Christmas by some of the big department stores, you believe the UK Retailers sector is set to experience a further rise.
Opening the position
Our price for the Retailers sector stands at 1796-1804 and you 'buy' one contract (the equivalent of £10 per index point) at 1804, the offer price.
On a Trader Account, you need to put down a deposit of 5% to open the position, calculated as 1804 (offer price) x £10 per point x 5% = £902.
Closing the position
A few days later our price for Retailers has fallen to 1716-1724 and you decide to cut your losses by 'selling' one contract at 1716.
Your loss on the trade is calculated as follows:
| Loss on trade | |
|---|---|
| Opening level | 1804 |
| Closing level | 1716 |
| Difference | 88 |
| Loss on trade: 88 points x 1 contract x £10 per point = £880 | |
To calculate the overall result you will also have to include interest and dividend adjustments.
Interest adjustments are applied daily to sector trades in exactly the same way as to Share CFDs. Dividend adjustments are applied whenever a stock in the relevant index goes ex-dividend.
For more information see the sectors contract details.
Of course, had the market moved in the opposite direction you would have made a profit.
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CFDs are leveraged products. CFD trading may not be suitable for everyone and can result in losses that exceed your initial deposit, so please ensure that you fully understand the risks involved.