Frequently Asked Questions

What is Margin trading?

Trading on margin is considered high risk as you can lose more than your initial investment.  CFDs and FX are leveraged products and the position is controlled by a small percentage of the value, which is called the initial margin. A typical margin requirement for a CFD trade is 10% – this means a £100,000 position in Barclays can be controlled by just £10,000. FX margin requirements are even smaller, sometimes requiring just 1%. Margin rates vary according to the Market Capitalisation, liquidity and volatility of the stock.

What is a Margin call?

Margin calls are made when the margin requirement is breached. As an example: £10,000 is being used to control a long position of 30,000 Barclays bought at 315p, which gives a value to the trade of £94,500. Barclays has a 10% margin requirement, this means that nearly the entire available margin is being used with just £550 spare.

If Barclays dropped by just 5p this would create an unrealised loss of £1,500 pounds which would upon being marked to market create a margin call. Cleared funds must then be deposited, or the position may be closed irrespective of the client’s view, with the loss being debited to the client’s deposit. It is always advisable to leave plenty of margin available so as to avoid the likelihood of margin calls.

What does Marking to Market mean?

Marking to market is a daily adjustment to the margin requirement based on the movement in the value of the underlying asset. You must cover any shortfalls in margin immediately. If they are not covered, your position may be closed irrespective of your wishes. Margin deposits are required in cleared funds, but mark to market excesses or deficits are not credited or debited to your margin account until closure of the position.

Examples of CFD’s

A Long Trade

A long trade is a position that is opened with a buy, in the expectation that the share price will rise.

For example: GlaxoSmithKline is currently trading 1236-1237.

Mr Jones believes that GlaxoSmithKline is going to rise and places a trade to buy 500 shares as a CFD at 1237.

The total value of the contract would be £6,185 but he would only need to make an initial 10% deposit (initial margin) £618.50.

The commission on the trade is £30.93 (£6,185 x 50 b.p.) plus a compliance charge of £12.50 and because he is buying a CFD there is no stamp duty* to pay.

A week later Mr Jones’s prediction was proved to be correct and GlaxoSmithKline rise to 1350 and he decides to close the position.

By selling 500 GlaxoSmithKline CFDs at 1350, the commission on the trade is £33.75 (£6,750 x 50 b.p.) plus a compliance charge of £12.50.

The profit on the trade is calculated as follows:

Overall Profit

To calculate the overall profit you must take into account the commission, compliance charge and financing charges on the deal.

Please note: If Mr Jones’s prediction was proved to be incorrect and the price of GlaxoSmithKline declined to 1125, then he could decide to close the loss-making position.

By selling 500 GlaxoSmithKline CFD’s at 1125, the commission on the trade is £28.13 (£5,625 x 50 b.p.) plus a compliance charge of £12.50.

The loss on the trade is calculated as follows:

Overall Loss

To calculate the overall loss you must take into account the commission, compliance charge and financing charges on the deal.

A Short Trade

A short trade is a position that is opened with a sell transaction in the expectation that the share price will fall.

For example: Lloyds TSB is currently trading at 273-274.

Mrs Smith believes that Lloyds TSB is overvalued and is going to fall and places a trade to sell 2500 shares as a CFD at 273.

The total value of the contract would be £6,825. Even though they are selling short, they would only need to make an initial 10% deposit (initial margin) £682.50.

The commission on the trade would be £34.13 (£6,825 x 50 b.p.) pluas a compliance charge of £12.50.

A week later Mrs Smith’s prediction was proved correct and Lloyds TSB falls to 246-247 and Mrs Smith closes her position.

By buying back 2,500 Lloyds TSB, the commission would be £30.88 (£6,175 x 50 b.p.) plus a compliance charge of £12.50.

The profit on the trade is calculated as follows:

Overall Profit

To calculate the overall profit you must take into account the commission, compliance charges and financing charges on the deal. Remember with a “short” sell the financing charge is credited to the holder.

Please note: If Mrs Smith’s prediction was proved to be incorrect and the price of Lloyds TSB rose to 300, then she could decide to close the loss-making position.

By buying back 2,500 Lloyds TSB at 300, the commission on the trade is £37.50 (££7,500 x 50 b.p.) plus a compliance charge of £12.50.

The loss on the trade is calculated as follows:

Overall Loss

To calculate the overall loss you must take into account the commission, compliance charge and financing charges on the deal.

How does Financing work?

Clients pay interest on the contract value of a long CFD. Interest is charged at a percentage over LIBOR (LIBOR is the London Interbank Offered Rate and is linked to base interest rates). Clients holding short CFD contracts receive interest on the cash that the sale of the underlying stock would have generated. This is similarly paid at an agreed rate under LIBID (London-Interbank-Bid-Rate).

All financing is calculated daily and is either debited or credited to the account depending on whether you are long or short.

Do I receive Dividends on CFD positions?

Holders of long CFD positions will, when dividends are paid on the underlying share, qualify for a proportional payout. Holders of short CFD positions will have to pay an amount equal to the full (gross) dividend paid on the underlying share.

What are the costs for CFDs?

Commission is charged for either side of the contract (to open and close), as a percentage of the total contract value. There is also a Compliance charge of £10.00 per transaction. There are no hidden costs and you will deal at the price of the underlying security/index. You will either pay or receive financing on a daily basis depending whether you have chosen long or short.

How can I deposit funds into my account?

You can pay by bank transfer to the following account:

Please note that we do not accept funds from third party accounts and we cannot accept Bankers Drafts or Cash Deposits.

How do I become a client?

Opening an account is very easy, for both advisory and execution only accounts. If you have a computer, click become a client and select the required account and complete the four stage process. You will receive a confirmation by email providing you with your log in details if your application is successful. You can also request forms by post. Once you have funded the account you are ready to trade.  Please be aware that our products are not suitable for everyone and in some cases your application may be rejected.

How do I register for a seminar?

Complete the registration form found under Seminars or call 020 7264 2360 to book your place

How much is required to open an account?

The minimum amount required on account to trade is £10,000 in either cash or stock.

How do I transfer my existing portfolio to Collins Sarri Statham Investments?

Simply instruct your broker to transfer your stock to Saxo Capital Markets UK Ltd (hereafter referred to as “SCML”). We do not charge for stocks transferred in, but there is a fee on transferring stock out.

What is DMA?

Direct Market Access (DMA) enables the private investor to buy and sell directly on the London Stock Exchange order book and place limit orders at the price you choose. In between the spread – which is viewed by the entire market – the orders are prioritised by time and price.

What products can I trade through my account at Collins Sarri Statham Investments?

If you qualify you can trade Equities from 22 major exchanges, over 6000 equity CFDs, 16 index CFDs, 160 Foreign Exchange Pairs, Futures and options, Bonds, ETFs and Spot Gold and Silver all from one trading account.

What is a Currency Pair?

A currency pair is a quotation of two different currencies against each other with the transaction currency being quoted first. For example: if you bought EUR/USD you would be taking a long position in Euros, while simultaneously taking a short position in Dollars.

What type of orders can I place?

Market, good for the day (GFD), stop, trailing stop and limit orders are all available.

How much does the advice cost?

Charges occur when you agree to place a trade.  There is no charge for the personal advice you receive from our Brokers.

How often do I receive a statement?

Statements can be viewed online 24hrs a day, but are only live throughout the trading day.
Unless you request otherwise, we will generally send statements to you via email on a monthly basis.

What is Technical analysis?

Technical analysis is a method of evaluating securities by analysing statistics generated by market activity, such as historic prices and volume. It does not attempt to measure a securities intrinsic (real) value, but instead uses charts and various theories to identify patterns that can suggest possible future activity and value.

Overseas mortgage exchange?

If you have a mortgage in a foreign currency (perhaps you have a holiday home in Spain) then you can protect your mortgage repayments against currency fluctuations by taking a long or short position in the related currency pair.

For example: you could see the value of your overseas mortgage rise by 20% if the pound falls in relation to the Euro. If you believe this may happen then you could take out a long position on EUR/GBP to protect against any such fall. For further information please speak to one of our brokers.

What is an ETF?

Exchange traded funds (ETFs) are investments that represent a baskets of securities that closely track the movement of an underlying index or sector.

ETFs are traded on an exchange just like a normal stock and will have a bid and offer price (selling and buying price). As you can go long (buy) or short (sell), they are a cost effective way of gaining exposure to an entire market without the need to purchase (or sell) every share in the index.

What is Spot Commodity Gold and silver trading?

Spot Tradable Commodities can be highly leveraged and are ideal for both long and short-term speculative investing. Spot commodities allow you to short sell as easily as taking a long position in Gold/Silver and can also be traded by Market, Limit and Stop orders. Spot Gold and Silver are traded through the Forex Trade Module online or by telephone through your broker.

What is a PIP?

A PIP is the smallest price change that a given exchange rate can make. Most major currency pairs are priced to 4 decimal places. The smallest change is that of the last decimal point – for most pairs this is the equivalent of 1/100th of 1%, or 1 basis point (1bp).

For example: if the GBP/USD was trading at 1.7843 – which means that for £1 you can buy $1.7843 – if there was a 10-pip increase the new price would be 1.7853. This means that the value of the Pound would be increasing and the value of the Dollar decreasing.

Stop losses, trailing stops and limit orders.

Employ stop losses to limit your downside that are triggered when a certain price has been reached. Use a trailing stop that follows the movement of the CFD to maximise the gain and lock in profit. A limit order is an order to buy a stock at no more or sell at no less than a specific price. This gives the customer some control over the price at which the trade is executed, but may prevent the order from being executed (“filled”). Please note that stop losses are not guaranteed.  Ask your broker for more information.

* Tax treatment depends on your individual circumstances and may be subject to change in the future.