Carbon Trading with CFDs

Carbon trading http://www.contracts-for-difference.com/markets/Carbon-trading.html is a volatile and politically involved market. However, at least one broker has seen this as an opportunity to launch a CFD product based on the futures market to allow traders to speculate easily on future emission values.

The standard size contract offered is for 25 metric tons, or tonnes, which is slightly less than the annual emission from a typical household for all their energy uses. The contract for difference allows you to profit whether the emission cost goes up or down. If you think that emissions will be increasing over the next year, and that increased demand will lead to higher prices, then you would buy a contract to take a long position.

As an example, the carbon emission CFD may be trading at €12.69 to €12.80. This is the price per tonne. The minimum you can trade would be 25 tonnes, or 25 times this amount, which is €317.25 to €320. To go long, you will pay €320, and Saxo require a 10% margin for this contract, so the initial outlay would be €32.

If the market rises to €13.69 to €13.80 then the value of the contract when you sell it will be €13.69 x 25, which is €342.25. Your profit on an outlay of €32 would amount to €22.25. As with all CFDs, the dealer, SaxoBank in this case, makes its profits from the spread between the buying and selling prices.

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Education

Tags:

• carbon trading
• cfds trading
• trading the financial markets
• trading energy
• financial trading
• contracts for differences