Contract For Differences - CFD
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Definition of 'Contract For Differences - CFD'
An arrangement made in a futures contract whereby differences in settlement are made through cash payments, rather than the delivery of physical goods or securities.
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Investopedia explains 'Contract For Differences - CFD'
This is generally an easier method of settlement because losses and gains are paid in cash. CFDs provide investors with the all the benefits and risks of owning a security without actually owning it.
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The benefits of these securities abound, but high leverage also magnifies potential losses.
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These derivatives allow investors to transfer risk, but there are many choices and factors that investors must weigh before buying in.
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For those who are new to futures but want a solid understanding of them, this tutorial explains what futures contracts are, how they work and why investors use them.
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