contracts for difference TRADING EXAMPLES Contracts for Difference Trading examples Halifax Investment Services Limited

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Halifax Trading Examples 1

Trading examples

Contracts for Dif

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contracts for

difference

TRADING EXAMPLES

Halifax Investment Services Limited

australian financial Services licence No. 225973 Date 26th april 2013

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2 Halifax Trading Examples

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example 1: Going Long

If you expect Coles Myer to announce good profit results to the market and anticipate its price could rise by 7% over the next sixteen days.

Open Position

Buy Quantity 5,000 shares

Price $9.10

Contract Value $45,500.00

initial Margin 10% $4,550.00

Commission 0.30% $136.50

Close Position

Sell Quantity 5,000 shares

Price $9.72 Contract Value $48,600.00 Commission 0.30% $145.80 Gross Profit $48,600.00 –$45,500.00 $3,100.00

Commission (Bought & Sold) ($136.50) ($145.80)

($282.30)

financing Cost

* (RBa Cash Rate 5.25% + 3.00%)

45,500 x 8.25% x 16/365 ($164.55)

Net Profit $2,648.59

* Please note for the purpose of this example the Reserve Bank of Australia Cash Rate is fixed at 5.25%.

9.1 (0) 9.2 (500) 9.4 (1500) 9.1 (0) 9 (-500) 9.2 (500) 8.7 (-2000) 8.9 (-1000) 9.2 (500) 8.5 (-3000) 8.8 (-1500) 9 (-500) 8.8 (-1500) 9 (-500) 9.4 (1500) 9.6 (2500) 9.72 (3100) 9.2 (500) 9.4 (1500) 9.1 (0) 9 (-500) 9.2 (500) 8.7 (-2000) 8.9 (-1000) 9.2 (500) 8.5 (-3000) 8.8 (-1500) (-500)9 8.8 (-1500) 9 (-500) 8.92 (-900) (-900)8.92 8.24 (-4300) 14.9 (0) 15.21 (-1550) 14.95 (-250) 15.48 (-2900) 14.73 (850) 15.62 (-3600) 14.26 (3200) 15.13 (-1150) 14.87 (150) 14.01 (4450) Price of CFD – Top figure (Variation Margin required) – Bottom figure

Price of CFD – Top figure (Variation Margin required) – Bottom figure

14.87 (150) 14.29 (3050) 14.32 (2900) 13.82 (5400) _13.69 (6050) 13.71 (5950) 14.9 (0) 14.82 (400) 15.21 (-1500) 14.95 (-250) 15.48 (-2900) 14.73 (850) 15.62 (-3600) 14.26 (3200) 15.13 (-1150) _14.87 (150) 14.01 (4450) 14.87 (150) 14.29 (3050) 14.32 (2900) 14.01 (4450) 14.42 (2400) 15.20 (-1500) 14.82 (400)

Price of CFD – Top figure (Variation Margin required) – Bottom figure 9.1

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In this example, the investor wants the price to rise and thus the darkened shaded area represents where the investor’s capital required (variation margin) to hold the position, will increase or decrease in real time, until the ultimate closing out of the trade. In this example we have assumed no increase or decrease in initial margin requirements.

Coles Myer chart long/profit

WarninG

You can potentially lose more money than is in your trading account. as a result of a loss, if your

account does not have sufficient funds to cover the loss, you will be required to fund the shortfall

immediately. You may face potential financial penalties, legal action or credit agency default. Note: CfD investors do not own or have any

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alternatively: your expectations prove to be incorrect and your stop loss is triggered.

Close Position

Price $8.92 Contract Value $44,600.00 Commission 0.30% $133.80 Gross loss $44,600.00 –$45,500.00 $900.00

Commission (Bought & Sold) ($136.50) ($133.80)

($270.30)

financing Cost

* (RBa Cash Rate 5.25% + 3.00%)

45,500 x 8.25% x 16/365 ($164.55)

Net Profit (loss) ($1,334.85)

9.1 (0) ₍₅₀₀₎9.2 9.4 (1500) 9.1 (0) 9 (-500) 9.2 (500) 8.7 (-2000) 8.9 (-1000) 9.2 (500) 8.5 (-3000) 8.8 (-1500) 9 (-500) 8.8 (-1500) 9 (-500) 9.4 (1500) 9.6 (2500) 9.72 (3100) 9.2 (500) 9.4 (1500) 9.1 (0) 9 (-500) 9.2 (500) 8.7 (-2000) 8.9 (-1000) 9.2 (500) 8.5 (-3000) 8.8 (-1500) 9 (-500) 8.8 (-1500) 9 (-500) 8.92 (-900) (-900)8.92 8.24 (-4300) 14.9 (0) 15.21 (-1550) 14.95 (-250) 15.48 (-2900) 14.73 (850) 15.62 (-3600) 14.26 (3200) 15.13 (-1150) _14.87 (150) 14.01 (4450) Price of CFD – Top figure (Variation Margin required) – Bottom figure

14.87 (150) 14.29 (3050) 14.32 (2900) 13.82 (5400) _13.69 (6050) 13.71 (5950) 14.82 (400)

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coles Myer chart long/loss

WarninG

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example 2: Going short

if you anticipate that the rally in BHP Billiton shares has peaked and anticipate that it could fall by as much as 8% over the next ten days.

Open Position

Price $14.90

Contract Value $74,500.00

initial Margin 20% $14,900.00

Commission 0.3% $223.50

Close Position

Price $13.71 Contract Value $68,550.00 Commission 0.30% $205.65 Gross Profit $74,500.00 –$68,550.00 $5,950.00

Commission (Sold & Bought) ($223.50) ($205.65)

($429.15)

interest Earned

* (RBa Cash Rate 5.00% – 2.50%)

74,500 x 2.50% x 10/365 $51.03

Net Profit $5,571.88

* Please note for the purpose of this example the Reserve Bank of Australia Cash Rate is fixed at 5.25%. 9.1 (0) ₍₅₀₀₎9.2 9.4 (1500) 9.1 (0) 9 (-500) 9.2 (500) 8.7 (-2000) 8.9 (-1000) 9.2 (500) 8.5 (-3000) 8.8 (-1500) 9 (-500) 8.8 (-1500) 9 (-500) 9.4 (1500) 9.6 (2500) 9.72 (3100) 9.2 (500) 9.4 (1500) 9.1 (0) 9 (-500) 9.2 (500) 8.7 (-2000) 8.9 (-1000) 9.2 (500) 8.5 (-3000) 8.8 (-1500) (-500)9 8.8 (-1500) 9 (-500) 8.92 (-900) (-900)8.92 8.24 (-4300) 14.9 (0) 15.21 (-1550) 14.95 (-250) 15.48 (-2900) 14.73 (850) 15.62 (-3600) 14.26 (3200) 15.13 (-1150) 14.87 (150) 14.01 (4450) Price of CFD – Top figure (Variation Margin required) – Bottom figure

14.87 (150) 14.29 (3050) 14.32 (2900) 13.82 (5400) _13.69 (6050) 13.71 (5950) 14.9 (0) 14.82 (400) 15.21 (-1500) 14.95 (-250) 15.48 (-2900) 14.73 (850) 15.62 (-3600) 14.26 (3200) 15.13 (-1150) _14.87 (150) 14.01 (4450) 14.87 (150) 14.29 (3050) 14.32 (2900) 14.01 (4450) 14.42 (2400) 15.20 (-1500) 14.82 (400)

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BHP chart short/profit

WarninG

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alternatively: your expectations prove to be incorrect and your stop loss is triggered.

Close Position

Price $15.20 Contract Value $76,000.00 Commission 0.3% $228.00 Gross loss $74,500.00 –$76,000.00 $1,500.00

Commission (Sold & Bought) ($223.50) ($228.00)

($451.50)

interest Earned

* (RBa Cash Rate 5.00% – 2.50%)

74,500 x 2.50% x 10/365 $51.03

Net Loss (loss) ($1,900.47)

Please note that CFDs are highly leveraged derivatives and involve the potential for both profit and losses, as reflected in the examples shown above. 9.1 (0) ₍₅₀₀₎9.2 9.4 (1500) 9.1 (0) 9 (-500) 9.2 (500) 8.7 (-2000) 8.9 (-1000) 9.2 (500) 8.5 (-3000) 8.8 (-1500) 9 (-500) 8.8 (-1500) 9 (-500) 9.4 (1500) 9.6 (2500) 9.72 (3100) 9.2 (500) 9.4 (1500) 9.1 (0) 9 (-500) 9.2 (500) 8.7 (-2000) 8.9 (-1000) 9.2 (500) 8.5 (-3000) 8.8 (-1500) (-500)9 8.8 (-1500) 9 (-500) 8.92 (-900) (-900)8.92 8.24 (-4300) 14.9 (0) 15.21 (-1550) 14.95 (-250) 15.48 (-2900) 14.73 (850) 15.62 (-3600) 14.26 (3200) 15.13 (-1150) _14.87 (150) 14.01 (4450) Price of CFD – Top figure (Variation Margin required) – Bottom figure

14.87 (150) 14.29 (3050) 14.32 (2900) 13.82 (5400) _13.69 (6050) 13.71 (5950) 14.9 (0) 14.82 (400) 15.21 (-1500) 14.95 (-250) 15.48 (-2900) 14.73 (850) 15.62 (-3600) 14.26 (3200) 15.13 (-1150) _14.87 (150) 14.01 (4450) 14.87 (150) 14.29 (3050) 14.32 (2900) 14.01 (4450) 14.42 (2400) 15.20 (-1500) 14.82 (400)

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BHP chart short/loss

WarninG

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0.2 (0) 0.2 (0) 0.18 (-1000) 0.22 (1000) 0.21 (500) 0.25 (2500) 0.17 (-1500) 0.04 (-8000) Price of CFD – Top figure

(Variation Margin required) – Bottom figure

10:30 AM 11:30 AM 12:30 PM 1:30 PM 2:30 PM 3:30 PM 4:30 PM Openning price

Tuesday Tuesday Tuesday Tuesday Tuesday Tuesday Tuesday Wednesday

example example 3: How you can lose more than

what’s in your account over 1 day

in this example a small mining stock is trading at 20 cents and you have read favourable reports about the stock and decide to buy $10,000 worth of stock with the initial Margin required from the CfD provider being $2000 (20%).

Previous to taking out the trade you have no open positions and an account balance of $4000

Open Position Buy Quantity 50,000 Price $0.20 Contract Value $10,000 initial Margin $2,000 Commission 0.30% $30 Close Position Sell Quantity 50,000 Price $0.04 Contract Value $2,000.00 Commission 0.03% or $10.00 $10.00 Gross Profit/Loss $10,000.00 $2,000.00 $8,000.00

Commission (Sold & Bought) ($30.00) ($12)

($40)

financing cost

RBa Cash rate 5.25% + 3%)

10,000 x 8.25% x 1/365 –2.26

Net Loss $8,042.26

However, after the close of business that day a mine accident occured as a result of their only mine collapsing.

after accessing the trading platform the following day you are shocked to find that the stock price is 4 cents and that your stock has been forcibily sold at the opening price.

as the stock has lost 60% of its value your Equity in the CfD immediately went into default and was closed out. as the loss was $8,042.26 (the CfD transaction and costs) which is greater than what was was in your account prior to the trade, you are now in deficit to the amount of $4,042.26 and thus owe this money to the CfD provider.