Index and share CFDs
What you learn in 3 minutesAn index CFD tracks a basket of companies, so its price moves with the whole group. A share CFD tracks one company, so its price moves with that company alone. Both cost you money in ways a currency pair does not, and this lesson shows those costs in naira before you open any chart.
US30 and a local index: hours and tick size
| Step | Amount | Note |
|---|---|---|
| US30 trading hours (Nigeria time) | about 2:30 pm to 9:00 pm | US cash session runs 9:30 am to 4:00 pm New York time; Nigeria is 5 hours ahead when New York is on standard time. |
| Local index trading hours | about 10:00 am to 2:30 pm | Nigerian Exchange trading runs 10:00 am to 2:30 pm Lagos time, Monday to Friday. |
| US30 tick size | 1 index point | The smallest price step the index quotes; a CFD price moves in whole points. |
| Cost of a 1-point move on 0.10 lots of US30 | ₦1,600 | 0.10 lots × 1 point × $1 per point = $1. At an assumed rate of ₦1,600 to $1, that is ₦1,600. The naira figure changes with the exchange rate. |
| Cost of a 1-point move on 0.10 lots of a local index | varies by broker | Local index CFDs are quoted in naira by some brokers and in dollars by others; the value per point is set by the broker, not by the exchange. |
Your broker may round the point value, charge a spread on entry, add overnight financing if you hold past the daily cut-off, and adjust your position for dividends or corporate events.
The mistake people make here
People treat an index CFD like a currency pair and leave it open overnight. Indices have a closing bell, so the market gaps to a new price when it reopens, and your stop loss may fill far from where you set it. Share CFDs also pay or charge dividends, and a merger or share split can change your position size without warning. Check the trading hours, the dividend calendar and the broker's corporate-action policy before you hold through a close.Check yourself
A US30 CFD moves 20 points while you hold 0.10 lots. The broker quotes $1 per point per lot. What is the move worth in dollars, and in naira at ₦1,600 to $1?
0.10 lots × 20 points × $1 = $2. At ₦1,600 to $1, that is ₦3,200.
A share CFD pays a dividend of $0.50 per share. You hold 100 shares. What cash adjustment should you expect, before any broker charge?
100 shares × $0.50 = $50. If you are long the CFD, the broker usually credits about $50; if you are short, it usually debits about $50. The exact amount and timing vary by broker.
In Nigeria
- Regulator
- The Securities and Exchange Commission (SEC Nigeria) regulates investment services in Nigeria. Check that a firm appears on the SEC Nigeria register before sending money.
- Funding
- Bank transfer, USSD and cards are common ways to fund a trading account. Each method may carry its own fee, and the fee varies by bank and by broker.
- Currency
- Accounts are often funded in naira (NGN), but index and share CFDs are usually priced in dollars, so the naira cost of a position changes with the exchange rate.
- Local index hours
- The Nigerian Exchange trades from 10:00 am to 2:30 pm Lagos time. A local index CFD follows those hours, not the longer currency market hours.
- Tax
- Tax rules for trading gains and losses in Nigeria can change. Speak to a qualified tax adviser about your own situation rather than relying on a general figure.