Contracts For Difference

Contracts for Difference offer access to a wide range of financial instruments from a single account. With TD Waterhouse CFDs you can trade on individual shares, indices, commodities and currencies on Irish, UK and International markets. They are quick and easy to trade online and by phone, and can be used to back an investment to increase or decrease in value.

A Contract for Difference does not confer ownership of the underlying investment, just access to the price performance including any dividend or corporate action equivalent. This means that because CFD traders do not hold the physical asset, any benefits associated with direct share ownership, such as shareholder voting rights or an invitation to the company's AGM, are not available.

As CFD trades do not confer ownership rights they are currently not subject to UK stamp duty* and neither are CFD trades on certain Irish stocks.

*Tax laws may change and depend on your individual circumstances.

• Click here for a full list of Irish stocks that are currently exempt from Irish stamp duty.

Contracts for Difference are a leveraged investment, which means that the initial deposit required to place a trade is only a fraction of the value of the total underlying position. The initial deposit is, in effect, a down payment on any loss that may be incurred. This leverage gives CFD investors the potential to make greater profits for the same initial investment. Conversely leverage also increases the potential for losses, which can quickly exceed the initial deposit. When you hold an open position with a CFD, the minimum deposit level must be maintained at all times.

TD Waterhouse CFDs offers instant execution in standard size or below as we make firm prices. Larger orders may be delayed as TD Waterhouse CFDs may need to hedge the underlying instrument.

You can close your position at any time during TD Waterhouse CFDs trading hours.

Where available you can use Stop Losses to automatically close out a position if it turns against you, and thus limit your downside.

You can use CFDs to reduce the risk of unexpected market movements. For example, you may have a long term share portfolio that you know you want to keep hold of, but you are worried that it may lose value in the short term because you think markets are heading down. You can take out a CFD that will help mitigate any short term loss, but at the same time may assist you to make a long term gain.

If you have a holding of physical shares you can sell CFDs against this holding without crystalising a potentially taxable gain. This enables you to control the time at which you crystalise capital gains or losses to manage your tax liability. Tax laws may change and depend on individual circumstances.

If you think that one stock is undervalued compared to another, you can use CFDs to go long (buy) one company and go short (sell) the other. For example BP compared to Royal Dutch, even though they run similar businesses, you can use CFDs to go long (buy) one company and go short (sell) the other. This can be a useful trading strategy for the more active CFD investor.

Please note that whereas there are many advantages of trading CFDs there are also risks. Since CFDs is a leveraged product, you can lose more than your initial deposit. You should ensure that you are aware of all the risks as this product is not suitable for everyone.