CFDs and Futures: The Differences

Comparing CFDs with leverage and futures, some similarities occur. However, there are some crucial points in which they differ from one another – and not just in legal terms.

While the trading of futures takes place on so-called futures exchanges, one enters into a contract with its broker when link take dealing with CFDs as a customer. In this case, the investor is not subject to the rules applicable on the forward exchange.

First of all, the legal differences between CFDs and futures should be examined a little more closely. Thus, leverage products are securities which are legally referred to as bearer bonds. Leverage products include, for example, leverage certificates, turbo certificates and much more. These also belong to the so-called derivative financial instruments.

It is also interesting to look at the measures that are taken if a loss is to be avoided that goes more information there beyond the original use of equity. In the case of futures through the futures exchange or the a basics broker, the positions at which positions are closed as there is no longer sufficient equity available. In the case of CFDs, a margin call is sent by the respective broker. The broker here has a much greater decision-making power.

An important aspect to consider when dealing with both CFDs and futures is that both investor products are not subject to any legal claim, which is a limitation of losses within a very specific framework. It is, however, possible to take some precaution in at click here! this respect. In this way, agreements with the broker can be made.
In the case of trading in futures, there is no legally binding exclusion obligation. Looking at leverage products, a so-called knock-out threshold ensures that the investor can make more losses than the original investment. For a soothing soothing buffer, the fact that the knock-out threshold is usually above the so-called financing threshold ensures long-certificates.

A practical example:

In order to be able to understand the whole as a layperson even better, it visit it can be helpful to look at a concrete example from practice. Let us assume that the DAX (Deutsche Aktienindex) has a long leverage ratio, with the index stand at 10,000 points and the financing threshold is 9000 points.

In this case, the knock-out threshold would be 9200 points. Once the index has reached this weblink into value, the corresponding certificate expires. The open positions in the underlying are then sold. Finally, the holders of the certificate are allocated the liquidity over the knock-out threshold. In the case of disposals below the knock-out threshold, it is the issuer who has to bear the losses incurred as a result.

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The financing costs under the magnifying glass

Finally, the financing costs are also an important aspect which should be looked at more closely. Because here there are also differences. For example, the CFDs are as follows: If a base is mapped to the so-called cash market, then the broker will usually pass on the financing costs to the customer at the level of the general market interest rate in case of long can read this positions. This can be done on a daily basis, but also on a weekly basis.

In the case of leverage certificates, the financing threshold is usually adjusted a little upwards per trading day. Thus, the value of the respective certificate is modified to the extent that the with bonuses difference between the financing threshold and the market price of the respective underlying is decreasing. For futures, you should always keep an eye on the implicit financing costs.

It is also interesting that the cash prize of the