dealforfree, page-21

re: dealforfree ... bohemian Hi Bohemian ... yours is a good explanation of the workings of CFD's.

I was particularly interested in the holding costs and did a comparison with an ETO using your $100k pozzie.

The comparison relates to D4F interest charges against THETA (time decay) for options.

The question of THETA is as broad as is long and no doubt any attempt to quantify will start a row here ... the purpose is to table a number for comparision purposes.

My BC tracks Option Greeks across the spectrum and THETA often falls within the range $0.002-$0.005 per option/day.

A typical number is about $0.003.

This equates for 10,000 contracts (your BHP at $10.00) at $30.00 per day against your $17.80 approximate for CFD. (=68.5% premium or nearly twice in this particular case)

Of course, D4F pays you to go SHORT so an direct offset here to begin with.

Traders going both LONG and SHORT would probably balance over time ...

NIL Brokerage also is an obvious financial advantage too.

Cheers ...


This is only my view ... read the red stuff.