Claire HunteAn overnight fee is an interest charge we have to make when you hold a leveraged position open overnight.
CFDs are leveraged instruments where you deposit only part of the money (margin) needed to open the position. The rest of the funds are provided by Capital.com. During the day there’s no charge to you for this borrowing. But to keep a CFD position open overnight, we charge a fee to cover the cost of the money we’re lending you.
How much that fee is varies depends on the risk of the particular asset you are trading with your leveraged funds. But remember, you only incur this fee if you don’t close your position before the overnight fee time begins.
You need to watch out for the closing time. It is usually either 21.00 or 22.00 UTC on the same day that you opened your position, but changes depends on summer time clock changes. Newer assets, such as cryptocurrencies, have different trading hours. Don’t get caught out.
It is important to remember that we don’t charge any fees if you close your position before the overnight fee time.
Where to find the rates?
To find the overnight fee for your specific trade look at that instrument’s individual page. Both the mobile app and the web version offer detailed descriptions of all the available markets, along with daily overnight fee rates for each asset.
Bear in mind the overnight rates differ between assets, depending on the risk of holding that asset overnight. Each is calculated differently and the most volatile assets – the ones that present the greatest risk – may see the overnight rate change as the price fluctuates.
Due to the way the rate is calculated and the differing risks, there are also different overnight rates for long and short positions.
Fees differ for long and short
Using the Capital.com platform, you can go long and short, in other words, buy and sell. Overnight fees differ for the two positions: if you go long, you always pay the interest yourself.
If you have an open short position, the interest can sometimes be credited to your account, reducing the profit on your short position. The amounts differ due the way the interest charge is calculated on credit and debit amounts for short and long positions.
The different prices are detailed clearly on each instrument’s page.
How do we calculate fees?
Let’s illustrate how Capital.com calculates the overnight fee amount. The simplest example is for shares. The rates for shares and indices are calculated the same way.
Here’s the formula used:
Trade Size x Closing Price x (3% +/- LIBOR) / 100% / 365 (or 360)
Trade Size is, for example, the number of shares.
Closing Price is the instrument’s value at 22:00 (UTC).
LIBOR is a one-month interbank interest rate. This is the interest rate that major banks charge to lend each other funds, so it is the base level that brokers have to pay to access the money they lend you.
3% is the broker’s interest. This is what Capital.com charges to cover the risks of holding a client’s position overnight.