ADVERTORIAL

Fast, Powerful, and Flexible:

CFDs - The New Way for Accredited Investors to Trade

It is no accident that CFDs have become one of the world's fastest growing trading products. Easy access to shorting Stocks, a wide range of global instruments including Indices, Commodities and Currencies and more powerful leverage than available when trading physical Shares, all add up to make a very powerful trading tool.

Although available to individual investors around the world since 2000, CFDs are still relatively new to Canada and currently only available to Accredited Investors.

So what are CFDs and why should they be considered as a part of an active trader's portfolio?

A CFD means Contract for Difference and is simply a contract between the trader and the issuer to honour the difference between the price at which a trade was entered and the price it was exited at. This means that CFDs are a derivative product similar to futures and options.

One of the major benefits of CFDs is that they are traded on leverage. Two ways that traders can enhance their returns are to put up the full cost of what they are trading and hope for a big move, or to leverage a substantial part of the cost of the position and use this leverage to capitalize on smaller moves. While the use of margin and leverage can enhance returns, it can also magnify potential percentage losses if a trade moves against you.

While CFDs offer leverage characteristics not unlike traditional futures and options, their price is based upon the cash rather than future price. This means that CFDs can be compared directly to the underlying market. This makes the transition from traditional Share trading to CFDs more easy to understand and the pricing more transparent.

Also unlike Futures and Options CFDs don't have a fixed expiry date, which means traders don't have to battle the clock or worry about decaying time values.

As easy to go short as it is to go long

Trading CFDs enables investors to dramatically increase their investment options and the flexibility of their portfolios. For example, it is much easier to take on a short position using CFDs than traditional equities. Because CFDs are derivative contracts, investors can take a short CFD position just as easily as a long position at any time, without having to worry about the uptick rule, borrowing restrictions or high margin requirements.

The ease of shorting CFDs significantly increases investors' trading options. Markets invariably go down as well as up, and if you can only potentially profit from upward movements, it is like trading with one arm behind your back. What's more, an investor concerned about short-term market prospects can use a CFD to hedge a long position that they want to hold for some time.

Another key benefit of trading CFDs is that they do not have the fixed order sizes that traditional Equities and Derivatives have. The minimum number of CFDs an investor can trade is one. This means that in terms of Commodities and Treasuries, investors can take on smaller initial position sizes than what it traditionally required in the Futures markets. For Equities, this means that investors can take on positions of any number of CFDs without having to pay the price and/or execution penalties common in odd-lot trading in traditional equity markets. Because of this, CFDs enable smaller investors to participate in price moves of higher priced stocks.

Diversify your portfolio with a wide range of global instruments

In the last twenty years, markets have become more global and CFDs allow investors to take advantage of this in many ways, empowering them to decide where and when they want to trade. Because CFDs are offered on Equities and Commodities around the world they provide an avenue for investors to easily increase their geographic diversification. With 24 hour trading available in some products, CFD traders also have the option of trading at a time that suits them.

CFDs also make it easy for investors to diversify their holdings across asset classes. CFDs are available for Equities, Commodities, Currencies, Treasuries and market Indices through one trading platform. This enables investors to take command of their asset allocation all through one account. What's more there are no exchange fees and traders can access pricing in any of CMC Markets' CFD instruments in the click of a mouse, at no additional charge.

Currently, CFDs are available to accredited investors only in Canada through CMC Markets. CMC Markets is a global leader in online trading, having launched Marketmaker™ the world's first online Foreign Exchange trading platform in 1996. CMC Markets has been offering CFDs since 2000, further levelling the playing field between individual and institutional investors. In the twelve months that ended in October 2007, CMC Markets globally handled over 16.2 million trades with a total value of over $1.1 trillion US. CMC Markets currently operates through 22 offices on 4 continents representing clients located in over 70 countries around the world.

To find out more about CMC Markets or CFDs please visit www.cmcmarkets.ca or complete the form and a member of our team will contact you shortly.

CFDs are highly speculative and can involve a high degree of risk. Investors in CFDs should be prepared for the risk of losing their entire investment and losing further amounts. CFDs are available to accredited investors only.