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CFD vs. FSB vs. Covered Warrants


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Sterling/US dollar intra-day



* Underlying: sterling/US dollar

* Time period: less that one day


Provider: IG Index (FSB) - Interactive Investor (CFD) - Comdirect (Online Broker)


For our first trade, I tried a quick foray into the foreign exchange markets. Speculating on the sterling/dollar exchange rate has been all the rage for a year or so now, ever since the surge in the FTSE 100 index lost momentum and began to drift sideways.


Serious forex investors will probably have a specialist currency trading account with the likes of Oanda or FXCM. But spread-bets, CFDs and covered warrants have been very popular with private investors.


I carried out a day-trade, backing sterling against the US dollar using an IG spread-bet account, an Interactive Investor CFD account and Comdirect as my covered warrant broker. I chose an SG June 2005 £1.85 call warrant because it had a good bid-offer spread and high enough gearing to turn a profit from a quick, but modest, rise in the underlying.



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