cfd trading and stock trading

Trading CFDs & Share Trading

Trading CFDs here at Spectrum Live is made easy. Your CFD trading platform allows you access to over 20 exchanges where CFDs are traded offering you competitive spreads.

The use of Share CFDs date back to the 1980's when they were used by institutions to cost efficiently hedge their equity exposures. It wasn't until the late 1990's that they became available to private clients. The Financial Services Reform Act (FSRA) came into effect in Australia on 11 March 2002. It opened the market for international firms to offer products previously unseen in Australia.

These days, a growing number of retail investors use CFDs both as part of their trading portfolio and as an alternative to physical share trading. This group includes both short term frequent traders as well as long term investors looking for a flexible alternative to margin lending.

A Contract for Difference, or 'CFD', is a contract between you and Spectrum Live to settle the difference in cash between the price at which you buy the CFD and the price at which you sell.

The price of a share CFD mirrors the underlying share price. For example, if the price of IBM is quoted on the exchange at $85.16 (Bid) - $85.17(Ask) then the CFD on IBM will have the same quote. If the price of IBM moves up in the underlying market then so does the CFD. For most markets there is no difference between the CFD prices and the underlying share prices in the physical market.

Therefore, instead of buying or selling physical shares, the CFD holder gets access to the performance – or price movements of a share – without ever having to take delivery of the actual shares. That is, CFDs allow you to receive most of the benefits of owning a security (share) without having to actually own the security (share). In other words you do not take delivery of the security so any difference in the price between when you buy the CFD and when you sell it is settled in cash. The difference is either profit or loss.

CFDs are also available on indices and baskets of securities. CFDs in relation to baskets of securities are known as Sector CFDs. An example of index CFDs is the S&PASX 200. An example of a Sector CFD is the Oil Sector CFD. Buying and selling the performance of a security or index using a CFD is similar to buying the actual underlying instrument using a loan.