| EQUITIES
Selling Spot Cisco (SPT CSCO)
A client believes that Cisco shares are overvalued and are going to decline soon.
Spot Cisco CFD contract (1,500 shares) is quoted at 26 70/75. The client sells 5 SPT CSCO contracts at 26.70. This requires a total deposit of $7,500. The client requires a minimum deposit of $1,500 for each position.
The prices of Cisco shares fall to 25 00/05. The client decides to close his short position. He buys back 5 lots of SPT CSCO at 25.05. The client has made $1.65 profit per share on the transaction (26.70 - 25.05).
If the client SOLD at 26.70 and BOUGHT back at 25.05, then the $1.65 per share profit will be represented in US Dollars as: (26.70 - 25.05) * 1 * 1,500 = $2,475 per contract. This results in a total profit of $12,375 ($2,475 * 5 contracts)
1. Sell 5 lots SPT CSCO @ 26.70 - Buy 5 lots SPT CSCO @ 25.05
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+ $1.65 per one Cisco share |
| 2. (26.70 - 25.05) * 1 * 1,500 = $2,475 |
$2,475 per contract |
| 3. $2,475 * 5 (No. of contracts) = $12,375 |
$12,375 gross profit |
| *Commission charges are NOT included in the above calculations |
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