The initial thing to be started with is that trading in the derivative of CFDs is regularly associated with a misunderstanding about who exactly owns the shares. In actual fact, there is nothing too hard about this – the shares are owned by the stock broker or brokerage firm. To be more exact there is a need to specify that when a person is dealing with CFD trading, this means that he/she is actually dealing with a swap trade. In other words a person is swapping the actual physical stock for a contract. So, when such positions are made, a person is responsible for 100% of the loss and 100% of the gains but does not possess the stock, nor has rights to the company.

Opening a long CFD position means for a trader that he/ she has the opportunity to make income dividends. To go into more details it should be added that in general they are 90% of the pip. This happens in the case the position is still held when the stock goes ‘ex-dividend’. Mostly, this takes a few weeks or even several weeks to be distributed.

As concerning opening a short position there is a need to explain that when the stock goes ‘ex-dividend’ a trader will have to pay the sum out of his/ her account. One more important feature to indicate here is that the trader is actually not sustaining a loss, since he/ she is paying out 20p for the dividend. So, there will be a profit of 20p for the cost drop generated.

It will be useful for you to find out that not all CFD trading positions produce dividends. Let me provide an example to make it easier to comprehend. In the case the ex-dividend date is on August 1 but the position was closed on August 3, a trader would be free to receive dividends. But if a trader opened position on August 3, he/ she would not be entitled to any dividends.

There is also one more vital aspect for you to know about CFDs broker – they will either credit a trader’s cash account or extract cash from his/her account. This is dependent on the kind of position that was made: long or short.

In addition, you need to be aware of that the dividends which are earned or lost in this derivative are not the main point. In fact, when the shares earn dividends it is more about the investment. Don’t forget that when someone opens positions with CFDs, he/ she starts speculating.