What does it cost to hold a CFD overnight?
This is the cost that does the quiet damage. Spreads are visible when you open a position. Overnight financing is charged every day you hold it, on the whole notional — and because it is small daily and invisible in the price, it is the cost most often left out of people's mental arithmetic.
The formula
For a long equity CFD, the standard shape is:
Daily financing = Notional × (reference rate + broker markup) ÷ 365
The reference rate is a benchmark such as an overnight or short-term rate for the position's currency. The markup is the broker's — commonly quoted around 2% to 3% annually, though it varies by firm and product. Financing accrues on calendar days; many brokers book three days' charge on one day of the week to cover the weekend. Conventions differ (some use a 360-day year; FX positions use tom-next swap rates instead), so always read the specific product terms.
Worked example
The same position as the previous lesson: 1,000 units at $50 = $50,000 notional, funded with $10,000 margin. Reference rate 4.50%, markup 2.50%, so 7.00% all-in.
Daily: $50,000 × 0.07 ÷ 365 = $9.59
| Held for | Financing paid | As % of the $10,000 margin | Price rise needed just to break even |
|---|---|---|---|
| 1 day | $9.59 | 0.10% | 0.02% |
| 30 days | $288 | 2.9% | 0.58% |
| 90 days | $863 | 8.6% | 1.73% |
| 1 year | $3,500 | 35.0% | 7.00% |
Read the bottom row twice. Holding this position for a year costs 35% of the capital committed, and the asset must rise 7% for the position to break even before spread and commission. The market can be exactly right about the company and the position still ends negative.
This is the mathematical reason CFDs behave as short-horizon instruments regardless of anyone's intention. Leverage multiplies the position; it also multiplies the carrying cost against the same deposit.
The short side
Shorts are charged on the same notional but the sign of the reference rate flips:
Daily financing on a short = Notional × (reference rate − markup) ÷ 365
With a 4.50% reference and a 2.50% markup, a short receives about 2.00% annually. But when reference rates are low — say 0.50% — the same formula gives −2.00%, and the short pays too. Both sides paying is entirely normal in a low-rate environment.
Dividend adjustments
A share price typically drops by roughly the dividend on the ex-date. Since the CFD tracks the price, that drop hits the position, so brokers make an adjustment:
- Long CFD — receives a dividend adjustment, commonly net of a withholding-tax-equivalent deduction (often quoted around 70–90% of the gross dividend, varying by market and firm).
- Short CFD — pays the adjustment, typically at 100% of the gross dividend.
The asymmetry is the point: neither side is made whole in the way a shareholder is. A shareholder receives the dividend as a legal entitlement; a CFD holder receives a contractual adjustment on terms the contract sets.
Try it now
- A short-term benchmark is below, the latest SOFR fixing. Add a 2.5% markup and recompute the daily financing on a $50,000 notional.
- Redo the same calculation with the reference rate from three years earlier, below. The difference between the two annual figures is what changing rates did to the cost of holding leverage.
- Verizon's dividends over twelve months and its dividend yield are below, a stock yielding well above 3%. A short CFD on $50,000 of it owes roughly the yield × $50,000 a year in adjustments alone, on top of financing, and the four payments in the first table are what that yield is made of. Write both numbers down as costs, not as reasons.