Swaps

What is a swap in trading?

A swap (or overnight financing) is an interest amount that is either added to or subtracted from your account whenever a CFD trading position is left open after a certain cut-off time (the “overnight financing time” which is 17:00 New York time).

The formula used to calculate the daily swap amount of a position is:

Key points about swaps:

• Swaps are only charged if positions are kept open past 17:00 New York time
• Swaps can be both positive and negative
• To take account for weekends, triple swaps are charged on Wednesday for FX and metals, and on Friday for oil instruments and indices.
• The overnight financing time and the daily swap percentage can be found in the “contract specifications” table for each instrument available on the trading platform.

Dividends

Dividends may impact the amount of overnight costs you pay or earn on your Index CFD position (e.g. the UK100). Index CFD's are made up of a group of equities that may pay dividends throughout the year. When a dividend is paid on a equity, the value of the equity will drop and therefore so does the value of the index.

Short positions will be positively impacted by the drop in Index Price, while long positions are negatively impacted. Dividend adjustments are applied on Index CFD products to negate the impact of the drop in Index Price.

Key points about dividends:

• If you are long an Index CFD, you are credited a dividend adjustment.  If you are short, you will be debited a dividend adjustment.
• This Dividend adjustment will be included in the swap (overnight financing) rate on the ex-dividend date.