Advantages of DMA CFDs

CFDs have become one of the most popular traded derivative products and for many good reasons. CFDs have been used by investment banks, which have used equity swaps for over 20 years. CFDs have provided retail traders with the same advantages that have made them such a popular product. FPM offers Direct Market Access for all of its global CFD products adding transparency to the list of advantages.

Leverage

One of the key benefits of CFD is that it helps better utilise capital by offering leverage. When trading CFDs on a small margin is required when taking out a much larger position. This means that with very little capital a trader can access to much greater profits . Margins are as little as 1% on some instruments.

Short Selling

Short selling enables a trader to sell a CFD at a high price and buy it back at a lower price to gain a profit. This enables traders to profit from not only rising markets but also falling. CFDs are unique in this fact that other traditional equity products do not offer this benefit. Whilst this is not available for every single instrument, FPM offers a large range of short sellable Securities, FX, Commodities and Indices. Another major advantage of short selling is that there is no cost of holding this position open, so it’s perfect for hedging purposes as well as speculation.

Hedging

Given that CFDs can be short sold, they are ideal tool for hedging purposes. Many equity portfolios remain vulnerable to market downturns and the cost of exiting and re-entering are far too high and risky. DMA CFDs enable traders to lock in the value of an equity portfolio by holding short positions that mirror that in the equity portfolio. This means for every dollar the equity portfolio loses the CFD portfolio will gain. With CFDs only requiring a very small margin this means a minimal outlay at a very little cost.

FX CFDs enables people to hedge currency balances. Indices CFDs enable people to blanket hedge a large portfolio without having to buy individual Equity CFDs. FPM also enable clients to open accounts that are Self Managed Super funds and trusts where many equity portfolios are held.

Lower Transaction Costs

Unlike tradition Equities trading and other derivatives products, CFDs have very low transaction costs. Many high volume traders chose to trader with FPM due to our flexible and competitive transaction costs. Please contact us to find out more about our competitive rates.

Simplicity

Direct Market Access (DMA) CFDs mirror the underlying exchanges making them very easy to trade. Other derivatives products may not move in line with the underlying financial instrument, such as options and futures, and therefore, can be very difficult to trade and understand. Along with this the majority of CFDs have no expiry either, and therefore, positions can be held open as long as necessary.

Dividends & Corporate Actions

For all equity CFDs, traders are entitles to a cash equivalent of any dividend that is paid. Another advantage of CFDs is that the dividend is paid on the ex date rather than the pay date as is the case when trading fully paid equities. You also have the ability to participate in other corporate actions like share splits and rights issues. FP Markets offer the most extensive list of Australian and other global equity CFDs ensuring you can get access to corporate actions and dividends where possible.

Flexibility

CFDs have the added benefit of enabling traders to use unrealised profits as margin to open new positions. CFDs are also cash settled and therefore make it much easier to trade in and out of positions multiple times throughout the day on the same available capital. Positions closed intra-day do not incur financing fees.