Index Trade

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  1. The UK 100 is currently trading at 6569 / 71. You think the market is due a correction so you decide to short the UK100 at £5 per point
  2. You place a sell order at 6569
  3. The Notional Trading Requirement (NTR) on the UK100 is 50. NTR is applied to Index, Treasury, Commodity, Forex, Sector and Bullion Bets and is a simple method of calculating an Initial Margin for less volatile instruments. Each instrument that uses NTRs has an NTR value which you simply multiply by your stake to determine your margin requirement. Your margin requirement will be £250 (£5 x 50 = 250)
  4. You hold the position overnight. The UK100 closes at 6600 that evening. The financing is calculated by taking your total exposure to the market 33,000 (close price x your stake) x LIBOR (assume 5%) - 3% / 360 = £1.83. £1.83 is paid to you from CMC Markets to hold this position overnight. If you were long you would incur a financing charge
  5. You close your position the next day at 6623 / 6625. You have lost 56 points (6569 - 6625) x £5 = £280 + financing payment of £1.83 = net loss of £278.23

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