cfd's - what risks?, page-6

Jason

I would be surprised if CMC do not mention the downside.

When they started in Aust they got into a bit of trouble with ASIC for this and entered an undertaking to ensure the downside as well as the up side is outlined.

The 2 major downsides to CFDs are the company you by CFDs over goes broke (SGW is one that CFD could have been traded on) or the company suffers a massive movement opposite to the position you take. Unlike buying warrants or ETOs where you risk is limited to the intitial outlay, with CFD's you could outlay $500 for a $10,000 position and lose $10,000 if the company goes belly up.

The other major risk is the company you are atually trading CFDs through goes broke.

If you manage the risk properly though CFDs can be a very good trade instrument