Contract for difference

Contracts for Difference (CFD) are a type of derivative allowing investors to bet on the movements of securities or stock markets without owning the underlying asset. These are agreements between an investor and a financial company to pay the difference between the opening and closing prices of the contract multiplied by the number of shares specified. Investors buy a position if they believe the price of the asset will rise or sell if they believe it will fall. CFDs are leveraged products and so investors only need to initially pay a small part of the total value of the contract. However, they are very risky as losses as well as profits can be huge.

This definition is for general information purposes only