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CFDs Made Simple: A straightforward guide to contracts for difference by Peter Temple

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3. How CFDs Work

Some investors regard CFDs, futures and spread betting as roughly similar. It is true that they all work in basically the same way, however there are differences that need taking into account.

Futures and spread betting contracts are essentially the same. Spread betting firms often base contracts around an underlying futures product, although spread bets differ from futures because they are exempt from CGT.

CFDs are subject to CGT but differ from spread bets in positive ways too. One is that the difference between bid and offer prices is almost always substantially less. CFDs on shares are usually available at the price prevailing in the so-called ‘cash’ market (in this case, this means the normal stock exchange price). CFDs ...

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