Opening the position
If you decide to open a long position on Barclays. The market price is 126.85/126.95. You go long on 10,000 shares at 126.95p, the offer price.
As a Trader Account holder the margin required to open the trade is 5% or £634.75. The commission on the trade is 0.10% or £12.69 (10,000 shares x 126.95p x 0.10%). There is no stamp duty to pay.*
The market price rises throughout the day, and you believe it will continue tomorrow. You decide to hold your position overnight.
Interest adjustments
Interest adjustments are calculated daily, by applying the applicable interest rate to the daily closing value of the position. The annual interest adjustment for a sterling denominated share such as Vodafone is found by adding the latest one-month LIBOR (London Interbank Offered Rate) to the financing fee.
On 1 April 2009, LIBOR was at 1.0112%, so the annual applicable interest rate on your Vodafone position, assuming a financing fee of 2.5%, would be 3.5112%:
| LIBOR: |
1.0112% |
| Fee: |
+ 2.5% |
| Total: |
3.5112% |
The closing bid price on 1 April 2009 is 127.35p, which gives you a closing value of £12735. The annual interest on £12735 would be £447.15, which creates a daily interest debit of £1.22 (£12735 x 3.5112% / 365).
Dividend adjustments
When you hold a long position and the share goes ex-dividend, the dividend value is credited to your account. In this example there was no dividend, but if there had been, and the amount of the net dividend was 7p per share, £700 would have been credited to your account (10,000 shares x 7p = £700).
Closing the position
Despite your prediction, Barclays begins to fall the following day. By the mid afternoon on 2 April 2009, the market price is 124.55/124.65. You decide to close your position and reduce your losses before the market falls any further. You sell 10,000 shares at 124.55p, the bid price. The commission on this transaction is 0.10% or £12.45 (10,000 shares x 124.55p x 0.10%).
Your loss on the trade is calculated as follows: |
