Index and share CFDs
What you learn in 3 minutesA reader asked: "If I buy an index CFD, am I buying shares in many companies at once?" Not quite. An index CFD tracks a basket of companies as one number, while a share CFD tracks one company. Both behave differently from a currency pair like USD/ZAR, which trades around 18.4100. This lesson shows what those differences cost you in rand.
20 points on US30 versus 20 points on a local index
| Step | Amount | Note |
|---|---|---|
| US30 CFD point value per 0.10 lot | R1.84 | One index point on 0.10 lots is worth 0.10 times the rand value of one US dollar. At USD/ZAR 18.4100, that is R1.84 per point. |
| 20 points on US30 CFD | R36.80 | 20 points times R1.84 per point equals R36.80. |
| Local index CFD point value per 0.10 lot | R1.00 | A local index CFD is often quoted in rand, so one point on 0.10 lots is worth R1.00. This varies between brokers. |
| 20 points on local index CFD | R20.00 | 20 points times R1.00 per point equals R20.00. |
| US30 trading hours | Around 15:30 to 22:00 South African time | US market hours. Times shift with daylight saving and vary between brokers. |
| Local index trading hours | Around 09:00 to 17:00 South African time | Local exchange hours. These also vary between brokers. |
Your broker may round the point value, charge a spread on entry and exit, and add a commission or financing charge. Dividends and corporate events on share CFDs can also be adjusted in cash. Check the contract specifications before you trade.
The mistake people make here
The common mistake is to treat an index CFD and a share CFD as if they were the same as a currency pair. A currency pair like USD/ZAR trades nearly around the clock, but an index CFD follows the hours of its underlying exchange, and a share CFD follows one company. That means you can be locked out of a position when the market is closed, and a dividend or a share split can change your position without you placing a trade. Instead, read the contract specifications for trading hours, dividend adjustments and corporate event rules before you open the position. Then check whether the point value is in rand or in the currency of the underlying index, because that changes the rand risk.Check yourself
If 0.10 lots on a local index CFD is worth R1.00 per point, what is 35 points worth in rand?
35 points times R1.00 per point equals R35.00.
At USD/ZAR 18.4100, what is 15 points on a US30 CFD worth on 0.10 lots?
First, one point on 0.10 lots is 0.10 times 18.4100, which equals R1.841. Then 15 points times R1.841 equals R27.615, which rounds to about R27.62.
In South Africa
- Regulator
- The Financial Sector Conduct Authority (FSCA) regulates financial services providers in South Africa.
- Money
- The rand is written R (ZAR).
- Example instrument
- USD/ZAR is used in this course, around 18.4100.
- Payment methods
- EFT, instant EFT and bank cards are common ways to fund a trading account.
- Trading hours
- Local index CFDs usually follow South African exchange hours, while US30 CFDs follow US hours. Both vary between brokers.