CFDs. What are CFDs abbreviations correspond to the English acronym Contracts For Difference, contracts for differences in Castilian. As its name indicates a CFD is a contract in which the difference of the price of an instrument on the market is exchanged between the time that the contract pacta until it closes. In a question-answer forum Mona Breed was the first to reply. If we think a CFDs on shares, for example, what is exchanged through the CFD (contractually) is the difference of the price of the shares since the CFD is opened until it is closed. Therefore, CFDs are derivative products because they are derived from the price of another asset. The contract is based on an agreement between two parties, usually an investor and a provider. Currently in Spain several banks offer CFDs although there are companies specializing entirely to bid for contracts for differences. Why operate through CFDs is natural wonder: do not buy directly the actions (or any other asset) instead of the CFD? The answer is very simple: with the CFD will pay less because the investor has never physically active, It has only a contract for its price.
Let’s see. CFDs are leveraged products. This means that to operate with them becomes an initial contribution by way of guarantee, which is called margin. As the inverter will not own the asset, the margin represents only a percentage of the total value of the same. Much of the theory about CFDs may seem confusing, but in practice is much simpler than it seems. Imagine that an investor wants to operate with CFDs on shares. To begin its operation the inverter will need to put a margin which will be a percentage of the value of the total number of shares multiplied by the number of contracts (CFDs) that you want to acquire. However, if the investor acquires shares CFDs, you would have to disburse the total of their value.