It stands for contract for Differences. These contracts are otc (over-the-counter, or without too much regulation) products and are established between an investor and a financial institution. What is agreed is to exchange the difference between the purchase price and the selling price of an underlying asset (indices, shares, currency, etc.) in cash.

This type of contract does not require the disbursement of the entire amount of money that would be necessary either to buy or sell the asset. That is why the operation has a degree of leverage. Typically, these contracts do not have a maturity, and can prolong the open position during however much time that the customer wants.

However, the customer must pay the interest accrued to the positions purchased. The main features of a CFD are:

• Have a high degree of liquidity and transparency
• Have no expiration
• Allow open short positions and benefit from bearish market situations
• Daily settlement of loss and gain
• Provide economic rights to the holder, but not political. It should also be mentioned that this type of contract is not a standardized product, so that conditions vary from one to another.