Re: CFD questions
I trade MM CFDs with IG Markets and ASX CFDs with CommSec.
Does a holder of a long CFD receive a dividend and imputation credits?
Dividend - Yes.
Imputation Credits - No for most CFD providers
ASX CFDs - Yes
Does a holder of a short CFD make a cash payment to the value of the dividend and imputation credits?
Yes
When a stock has a split the price usually lowers proportionately to reflect the increase in numbers of shares, is the CFD adjusted in the same way or does it blindly follow the new price?
The CFD is adjusted according to the split, so a 2:1 split in the underlying share will reflect in a 2:1 split in the CFD position
Do all CFDs have the same level of leverage, what is the leverage?
No, it varies widely from as low as 1% to as high as 75% depending on the specific instrument. Most share CFDs in the ASX300 are around the 10% mark.
A CFD seems to be very much like a single stock futures contract, what's the difference? Is there an expiry date for a CFD?
A CFD over a share has no expiry date. CFDs can also be taken over indicies, currencies and options - most of these instruments track the underlying futures contract and thus have expiry dates.
Are there any issues with liquidity on exchange traded CFDs?
By exchange traded CFDs I presume you are referring to ASX CFDs. There is no liquidity at all in these instruments other than that provided by the designated market makers. The depth is a wasteland of inactivity. The Bid/Ask spread is always significantly wider than in the underlying market. (The worst I saw was in the early ASX CFD days when the initial takeover offer for RIO was announced. The real market spread was 3 cents. The ASX CFD spread at the same time was 10 dollars.) Most of the time now the spread is about double the underlying.
Is it a good idea to steer clear of market makers?
If you are talking about ASX CFDs, then there is no market apart from that provided by the market makers - very few traders use them.
If you are talking about over the counter CFDs in marketmaker model then the majority opinion is that it is better to use DMA models rather than MM models. I use MM and have adapted the way I use the CFDs to avoid the pitfalls associated with MM.
Is there any advantage of shorting CFDs as opposed to shorting stocks?
OTC CFDs - generally cheaper and easier.
Do you have any links to good pages which clearly explain CFDs?
READ THE PDS statements very, very carefully and understand all the conditions. If not, you will be surprised sooner or later by how the provider works.
Never, never, never use maximum leverage with CFDs. You will go broke and then some.
Before using CFDs make sure you can successfully trade the underlying instrument including understanding how to quantify and manage risk and then proceed to use the CFDs to allow you to take on risk above what your cash will allow.