CFD (contract for difference)

With a contract for difference, you agree with a provider to exchange the change in value of an underlying asset, such as a share, index, currency or commodity, between the moment a position is opened and the moment it is closed. If you go long and the price rises, the provider pays you; if it falls, you pay. You can also go short to profit from falls. You put down only a fraction of the position's value as margin, so the position is leveraged. You never own the underlying asset and have no shareholder rights, and holding positions overnight usually incurs financing charges.

CFDs are high risk: losses can be large and rapid, and can exceed the margin you put down on a trade. In the UK and EU, providers must warn clients what percentage of their retail accounts lose money, and rules for retail clients cap leverage, require positions to be closed when margin runs too low and provide negative balance protection, which stops an account going below zero. Professional clients, and clients in many other countries, may not have that protection and can owe more than they deposited. CFDs are generally not available to retail investors in the US. In the UK, spread betting works in a similar way but is taxed differently.