What is a CFD Dividend Adjustment？
Dividends in Index CFDs When trading Contracts for Difference (CFDs) on Indices, dividends play a key role in influencing positions.
CFDs allow traders to speculate on price movements without owning the underlying asset, but they still have exposure to dividends.
Positions in the Index CFDs are subject to possible dividend adjustments. A dividend adjustment is applied when a position passes its ex-dividend date, meaning when a position is left open at the settlement time of the previous trading day.
For long positions, the dividend adjustment of 70 per cent is credited to the client's account; in case of short positions, the dividend adjustment of 100 per cent is debited from the client's account. The values in the columns Long and Short in the table show the dividend amount in the quote currency of the corresponding CFD instrument paid/charged per 1 contract.
Index CFDs: Index CFDs are composed of the performance of a group of stocks. When any of the constituent stocks of an index pays a dividend, the value of the index usually drops on the ex-dividend date. For traders holding long positions in index CFDs, a dividend adjustment may be credited to offset the drop. Conversely, short position holders will be debited the dividend amount.
Note: Dividends may be adjusted according to WeTrade MetaTrader trading platform interest rates. Please refer to WeTrade MetaTrader trading platform/Swap Long - Swap Short for further details.
Dividend Adjustments Examples
1. Nasdaq Index (NASUSD) Example
Scenario 1:
Scenario 1:
Buy Position
Holding a Buy of 1 lot on NASUSD on the ex-dividend date means you will receive a dividend adjustment when a component stock of the index pays a dividend.
Calculation:
Dividend amount × Contract size = $3.50 × 5 = $17.50
This $17.50 will be credited to your account.
Scenario 2:
Scenario 2:
Sell Position
If you hold a Sell position of 1 lot on NASUSD on the ex-dividend date.
Calculation:
Dividend amount × Contract size = $5.00 × 5 = $25.00
this $25.00 will be deducted from your account.
Notice on Dividend Adjustment
Dividend adjustments are particularly important for traders and investors engaged in index CFD (Contract for Difference) trading. These adjustments occur when a company pays dividends to its shareholders and they may affect the underlying CFD positions.The ex-dividend date refers to the date on which index CFDs are no longer eligible to receive dividends. Investors who purchase index CFDs on or after this date will no longer be entitled to the corresponding dividend distribution.
