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CFD Hedge Graph

The picture above shows example of SHL stock (1000 shares) value (vertical) vs time horizontal axes. Redline shows ordinary SHL stock value overtime monthly. Greenline shows SHL STOCK+CFD value without considering any fees for CFD. Blueline shows SHL+CFD value considering total one-off CFD fee and total ongoing holding fees.

The one-off fee drops the starting point of the blue line down and ongoing fees determine how steep is the slope. One-off fee and ongoing fees are entered in red cells ($707.5 and $200 retrospectively).

What are the typical values of CFD one-off entry/exit fee and what are typical ongoing fees? Say with Interactive Brokers or similar providers. I want to get the graph right.

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  • Hedging involves trade offs and always has a cost. It may be a direct cost such as buying puts or it may be the potential of an opportunity loss such as selling a covered call.
    – Bob Baerker
    Commented May 5, 2020 at 12:42
  • Your question is quite complicated and multi faceted. Could you rephrase to be a bit more focused? It will have more success getting answers being a bit terser.
    – Marcus D
    Commented May 5, 2020 at 15:05
  • You right. Answers focus more on hedging while my question was about typical CFD time frame one off and holding fees would eat 5% of stock value. Didn't write it well.
    – Petkus
    Commented May 5, 2020 at 20:17
  • I see it has been edited, but if it still doesnt say what you want it to say, you can edit further.
    – Marcus D
    Commented May 6, 2020 at 8:06

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I'm not following you 100% but I think you're looking for a way to lock in profits after an arbitrary 25% gain. If you own a stock, then you sell a CFD, you have the same risk profile as if you just sold the stock to cash out. Any gains or losses in one are offset by the other, so you have effectively no position. Note that dividends are offset as well since the price of the stock decreases by the amount of the dividend, affecting both the stock and CFD equally.

There are other ways to lock in gains or protect against losses. You've identified a few downsides of various hedging strategies, but no hedge is perfect. You either pay a premium for protection (e.g. buying puts) or give up some upside to gain downside protection (e.g. collars, covered calls). A Stop Loss order is "free" but you have to choose when to sell.

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  • My apology. Shorter is better. I was after time in days answer for how long it usually typically takes to loose 5% in value selling CFD to hedge a stock of $10000. Purely due to 1 off and holding ongoing fees.
    – Petkus
    Commented May 5, 2020 at 20:25

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