Some questions i'm hoping to answer, copy pasting my questions from another thread.
I understand that there are commission charges for each trade that you make and financing costs for the shares when you long and margin calls etc.
what i don't understand are:
why do you get a dividend? and why do you get to participate in stock actions? From my understanding if you trade via CFD, You do don't own the stock and are simply trading on the price movement correct?
- How does the counterparty make money other than the Commission/Financing charges from overnight/margins calls? Is it enough to pay off their losses?
- for e.g you short noble at $1.00 and it goes down to $0.10 in one day, does the broker pay you out? wouldn't they make a huge loss if this occurs? where does the money come from?
- Why do they pay you a daily financing fee on your short CFD? it doesn't make sense because technically you're not giving them an asset and they're giving you free money for taking the risk for the short, which you will profit from if it goes south, it looks like needless upside
- Does the broker always take the counterparty position? I.e. you sell a CFD (taking a short positon), does the Broker have the choice to accept it? or will it ALWAYS accept the other position?
Thank you, it's so confusing for a newbie investor.