Strategies

Going long

The simplest strategy is to use CFDs to benefit from a geared move on the stock upwards without incurring stamp duty.

Going short

You can use CFDs to establish and maintain a short position in a stock indefinitely without having to continually roll the position over. Short positions normally attract an income from the money generated from the sale of the stock but stock dividends have to be paid to the CFD provider.

Hedging

You can offset an existing stock position so as to reduce market risk particularly in terms of a different time horizon to an underlying position. In other words a trader may want to reduce exposure temporarily to a stock without a sale of the underlying stock.

Index Constituent changes

Traders can take advantage of index constituents changes and the volatility induced by fund managers reweighting tracking portfolios by anticipating index promotions and relegations.

Directors Dealings

Stocks often move on news of substantial directors buying and selling. You can take advantage of these short-term moves via CFDs.

Breaking stories

Low transaction costs and gearing allows nimble traders to take advantage of market-moving stories.

Arbitrage

Take advantage of market discrepancies by simultaneously buying one position and selling another via CFDs.

Pairs trading

You can extract outperformance of one stock against another while reducing overall market risk by buying one CFD while selling another CFD in a similar stock e.g. BP and Shell.

Tax management

There may be tax reasons why a holder of a stock cannot sell a stock, yet CFDs can still be used to reduce short-term exposure by taking an offsetting position.

Conversion and cash release

You can lodge an existing stock as security, which is margined at an appropriate rate, thereby releasing funds for trading.

Short-term trading and Speculation

Take advantage of take-over situations and stock spikes by trading quickly and efficiently before more traditional stock traders.