Trade Options CFDs in Libertex

Take the US SPX 500 with the of $3,000 and for example, you think it will go up. If you BUY directly one SPX 500 unit for $3,000 and it goes up to $3500, a profit of $500 will be made if the position is closed. This leads up to $500 profit with a $3,000 investment or ( 500/300)*100 = 16.67% return.

Now, coming back to options CFDs trading, let’s buy 20 call option CFDs on the US SPX 500 index for the price of $150, which leads to a total of $3,000.

The price movement ( from $3,000 to $3,500) can increase the price of the CFDs option to 4-6 times, however, for an example let’s say the increase is just 3 times. In this scenario, if you were to close the position and sell the 20 Call option CFDs at the new price of $450 (3 x $150), you would get $9000 (20 x $450). Therefore the result will be $6,000 profit from $3,000, this will lead to (6000/3000) * 100 = 200% return.

This example demonstrates how you could generate a higher rate of return by using options CFDs instead of investing directly in the index.

We should also focus on the risks involved: if the S&P 500 had declined from $3,000 to $2,500 when you decided to close your position, you would have lost only $500 if you had invested in the index directly. However, if the S&P 500 had declined to $2,500 and didn’t recover before the expiration of the underlying option, the value of your option CFD could have declined to 0 if its strike price is lower than the current market price of the S&P 500. In this scenario, you would have lost your entire investment.