Contract For Difference

What is Contract For Difference?

CFDs are a crucial type of financial instrument. It enables investors to safeguard themselves against significant changes in the value of the assets they are selling. In essence, a CFD guarantees that the seller will be compensated for the asset's value at the time of the transaction. It makes no difference if the actual transaction takes place many months later due to administrative and documentary requirements. Even though the necessary paperwork is ready, the asset's price could drop, depriving the seller of the anticipated first profit. In this situation, sales are prevented by certificates of difference.

By agreeing to a CFD, the buyer guarantees that the agreed-upon price will be paid for the asset regardless of upcoming variations. In effect, the buyer accepts responsibility for paying any price difference between the agreed-upon sum in the CFD and the asset's actual selling price at the time of the transaction.