How to calculate SWAP(Overnight Financing) on Share, ETF, Index and Commodity CFDs

October 30, 2017

SWAP is a necessary knowledge while keeping open positions for over a day.

How to calculate SWAP(Overnight Financing) on Share, ETF, Index and Commodity CFDs

When trading leveraged Share, ETF, Index and Commodity CFDs with iFOREX, your open deals are subject to Overnight Financing at the end of each trading day.

This Overnight Financing may be subject to credit or debit, calculated on the basis of the relevant interest rates for the currencies in which the underlying instrument is traded, plus a mark-up.

The mark-up for Shares is 2.5% and for ETFs is 5%. The mark-up for Indices and Commodities is 2.5% and for Cryptocurrencies is 10%.

Formula for calculating “Overnight Financing”

Calculation of Overnight Financing Percentage when you Buy (Long Positions):

Overnight Financing Percentage = – ((3M interest rate + markup) 360)

Calculation of Overnight Financing Percentage when you Sell (Short Positions):

Overnight Financing Percentage = ((3M interest rate – markup) 360)

To calculate the Overnight Financing Amount, simply multiply the percentage by the deal amount:

Overnight Financing Amount = Deal Amount × Overnight Financing Percentage

In case of trading “Index and Commodity CFDs”

Example 1

This example involves a situation whereby the Interbank Rate is HIGHER than the markup. In such cases, your account will be debited when you go Long and credited when you go Short:

  • Instrument = Brazil Ibovespa
  • Brazilian Real (BRL) 3M interest rate (annualized) = 9.567% = 0.09567
  • Markup = 2.5% = 0.025
  • Deal Amount value expressed in currency = 127,380 BRL (2 Index contracts at Current Closing Rate of 63690 BRL per contract)

Overnight Financing Percentage when you Buy (Long Positions):

Overnight Financing Percentage = – ((0.09567 + 0.025) / 360) = -0.0003351944 = -0.03351944%
Overnight Financing Amount = 127,380 × (-0.0003351944) = -42.70 BRL, meaning a 42.70 BRL charge per day (≅13.58 USD)

Overnight Financing Percentage when you Sell (Short Positions):

Overnight Financing Percentage = ((0.09567 – 0.025) / 360) = -0.00019630556 = 0.019630556%
Overnight Financing Amount = 127,380 × 0.00019630556 = 25 BRL credit per day (≅7.95 USD)

Example 2

This example involves a situation whereby the Interbank Rate is LOWER than the markup. In such cases your account will be debited each night regardless of the direction of your position:

  • Instrument = Oil (Crude Light WTI)
  • US Dollar (USD) 3M interest rate (annualized) = 1.08% = 0.0108
  • Markup = 2.5% = 0.025
  • Deal Amount value expressed in currency = 53,250 USD (1,000 Oil barrels at Current Closing Rate of 53.25 USD per barrel)

Overnight Financing Percentage when you Buy (Long Positions):

Overnight Financing Percentage = – ((0.0108 + 0.025) / 360) = -0.00009944 = – 0.009944%
Overnight Financing Amount = 53,250 × (-0.00009944) = -5.30 USD, meaning a 5.30 USD charge per day

Overnight Financing Percentage when you Sell (Short Positions):

Overnight Financing Percentage = ((0.0108 – 0.025) / 360) = -0.00003944 = -0.003944%
Overnight Financing Amount = 53,250 × (-0.00003944) = -2.10 USD, meaning a 2.10 USD charge per day

In case of trading “Share and ETF CFDs”

Example 1

This example involves a situation whereby the Interbank Rate is HIGHER than the markup. In such cases your account will be debited when you go Long and credited when you go Short:

  • Instrument = Gazprom (GAZP)
  • Russian Ruble (RUB) 3M interest rate (annualized) = 9.5% = 0.095
  • Markup = 2.5% = 0.025
  • Deal Amount value expressed in currency = 2,459,000 RUB (20,000 Shares at Current Closing Rate of 122.95 RUB per share)

Overnight Financing Percentage when you Buy (Long Positions):

Overnight Financing Percentage = -((0.095 + 0.025) = -0.000333333 = -0.0333333%
Overnight Financing Amount = 2,459,000 × (-0.000333333) = -819.67 RUB, meaning a 819.67 RUB charge per day (≅14.60 USD)

Overnight Financing Percentage when you Sell (Short Positions):

Overnight Financing Percentage = ((0.095 + 0.025) / 360) = 0.000194444 = 0.0194444%
Overnight Financing Amount = 2,459,000 × 0.000194444 = 478.14 RUB credit per day (≅8.52 USD)

Example 2

This example involves a situation whereby the Interbank Rate is LOWER than the markup. In such cases, your account will be debited each night regardless of your position’s direction:

  • Instrument = Apple (AAPL)
  • US Dollar (USD) 3M interest rate (annualized) = 1.08% = 0.0108
  • Markup = 2.5% = 0.025
  • Deal Amount value expressed in currency = 70,600 USD (500 Shares at Current Closing Rate of 141.20 USD per share)

Overnight Financing Percentage when you Buy (Long Positions):

Overnight Financing Percentage = – ((0.0108 + 0.025) / 360) = -0.00009944 = -0.009944%
Overnight Financing Amount = 70,600 × (-0.00009944)= -7.02 USD, meaning a 7.02 USD charge per day

Overnight Financing Percentage when you Sell (Short Positions):

Overnight Financing Percentage = ((0.0108 – 0.025) / 360) = -0.00003944 = -0.003944%
Overnight Financing Amount = 70,600 × (-0.00003944) = -2.78 USD, meaning a 2.78 USD charge per day

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