Margin is a term derived from the futures market, and provides for leveraged trading in financial
products. In its most simple format, if you offered the trading of an instrument at 5% margin, in
effect you need only to deposit 5% of the total purchase cost of that deal to open that position.
Initial margin requirements for CFD positions are a percentage of the total contract value.
The majority of share positions are margined at 5% and all index and sector positions are margined
Initial Margin (in currency of underlying exchange) = (Quantity x Share Price) x 5%
Index and Sector Positions:
Initial Margin (in currency of underlying exchange) = (Number of contracts x level) x 1%
You buy 2000 contracts of Vodafone @ 140.25. This provides a notional position of 2000 x 140.25 = 2,805.
Vodafone is margined at 5% so you would need at least 140.25 initial margin to open this position.
If Vodafone's price goes down to 138, the margin requirement would then move down proportionally
to 2000 x 138 = 2,760, where 5% of this contract value would now become 138 which is required to
hold this position.
Spread Betting, CFDs and Forex are leveraged products and carry a high degree of risk to your capital and it is possible to lose more than your initial investment. Only speculate with money you can afford to lose. These products may not be suitable for all investors, therefore ensure you fully understand the risks involved, and seek independent advice if necessary. CMC Markets UK Plc and CMC Spreadbet Plc are authorised and regulated by the UK Financial Services Authority. The Irish Financial Services Regulatory Authority has a supervisory role in respect of CMC Markets Ireland conduct of business and transaction reporting obligations.*Tax laws can change.