An index CFD can be priced in two ways. A cash, or spot, index CFD follows the current level of the index, has no expiry and is charged overnight financing each day it is held. A futures-based index CFD follows an index futures contract, has an expiry date, carries no daily financing because the cost is already in its price, and has to be rolled or closed each quarter. The better choice depends mainly on how long you intend to hold.
Key takeaways
- Cash CFDs suit short holding periods; futures CFDs can be cheaper for positions held for weeks.
- The futures price differs from the cash index by the “basis”, which reflects interest rates minus expected dividends.
- The basis shrinks to zero as expiry approaches.
- Cash CFDs apply dividend adjustments when index members go ex-dividend; futures prices already allow for expected dividends.
- Futures CFDs usually have wider spreads but no daily financing charge.
| Cash index CFD | Follows the index · no expiry · daily financing · dividend adjustments |
|---|---|
| Futures index CFD | Follows a futures contract · expires quarterly · no daily financing · rollover or close |
| Basis | Futures price − cash index |
| Quarterly expiry months | March, June, September, December for most index futures |
| Marketsall types | Shown in the symbol specification in MetaTrader 5 |
Cash vs futures index CFDs side by side
| Contract feature | Cash (spot) index CFD | Futures-based index CFD |
|---|---|---|
| Price follows | The index, derived from futures fair value | A specific futures contract |
| Expiry | None | Yes, usually quarterly |
| Overnight financing | Charged or credited daily | None; the cost is in the price |
| Dividends | Adjustment on ex-dividend dates | Already reflected in the price |
| Spread | Usually tighter | Usually wider |
| At expiry | Nothing happens | Position closes or rolls to the next contract |
| Typical use | Intraday and short-term positions | Positions held for weeks |
What is the basis, and why does it disappear?
Buying index futures is like buying the shares with borrowed money and without receiving their dividends. So the fair futures price is roughly the cash index plus interest on its value, minus the dividends expected before expiry. When interest rates are above dividend yields, as in the US in recent years, futures trade above the cash index. At expiry the futures contract settles at the index level, so the gap closes.
| Input | Value |
|---|---|
| Cash index | 6,500 |
| Interest rate | 4% a year |
| Dividend yield | 1.3% a year |
| Time to expiry | 3 months (0.25 years) |
| Basis | 6,500 × (4% − 1.3%) × 0.25 ≈ 44 points |
| Fair futures price | About 6,544 |
This is why a futures CFD looks “more expensive” than a cash CFD on the same index. You are not paying extra; the financing that a cash CFD would charge day by day is built into the starting price and is earned back as the basis shrinks.
Which is cheaper to hold?
| Holding period | Cash CFD | Futures CFD | Usually cheaper |
|---|---|---|---|
| Intraday | Spread only | Wider spread | Cash |
| A few days | Spread + a few days’ financing | Wider spread | Often cash |
| Several weeks | Spread + weeks of financing | Wider spread, no financing | Often futures |
| Past expiry | Continues unchanged | Must roll, with a new spread | Depends on rollover cost |
The crossover depends on the provider’s financing rate and spreads, so compare the actual numbers in the contract specification. Financing mechanics are in what a swap is.
How dividends are handled
A price index falls when its members go ex-dividend. On a cash CFD, the provider offsets that with an adjustment: long positions are usually credited and short positions debited. On a futures CFD, expected dividends are already in the price, so no adjustment is made; a surprise in dividends shows up as a small price change instead. The DAX is an exception among major indices because it is a performance index; see the DAX guide.
What happens at expiry?
Index futures on US500, US100 and US30 expire on the third Friday of March, June, September and December, the same day as many options. A futures CFD is either closed or rolled a few days before. When it rolls, an adjustment is applied so that the jump from one contract to the next does not create a profit or loss by itself, but a spread is usually charged.
What it costs to trade index CFDs as a CFD
Both types are CFDs: no shares or futures are owned. See what a CFD is and index trading.
| Cost | When it applies | Note for index CFDs |
|---|---|---|
| Spread | Every trade | Usually tighter on cash CFDs, wider on futures CFDs |
| Overnight financing | Cash CFDs only | Daily, based on a reference rate plus a margin. |
| Dividend adjustment | Cash-based index CFDs, when constituent shares go ex-dividend | Long positions are typically credited and short positions debited, so that the index’s fall on the ex-dividend date creates no profit or loss. |
| Rollover | Futures CFDs only | At each quarterly expiry; spread charged on the roll. |
| Slippage | Both | Fast markets and the cash open |
Key risks
Unexpected rollovers. Forgetting that a futures CFD expires can leave a position closed or rolled at an inconvenient time.
Financing drag. Holding cash CFDs for weeks can cost more than expected.
Price confusion. Futures and cash quotes on the same index differ; compare like with like.
Leverage. See how leverage increases trading risk.
Risk warning. Trading CFDs carries a high level of risk since leverage can work both to your advantage and disadvantage. As a result, the products offered on this website may not be suitable for all investors because of the risk of losing all of your invested capital. You should never invest money that you cannot afford to lose, and never trade with borrowed money.
Frequently asked questions
What is the difference between a cash index CFD and a futures index CFD?
A cash index CFD follows the current index level, has no expiry and is charged overnight financing daily. A futures index CFD follows an index futures contract, has a quarterly expiry, has no daily financing and must be closed or rolled before expiry.
Why is the index futures price higher than the cash index?
The futures price reflects the cost of holding the index until expiry: interest on its value minus the dividends expected in that time. When interest rates exceed dividend yields, futures trade above the cash index. The gap, called the basis, shrinks to zero at expiry.
Which is better for holding a position for weeks?
Often the futures-based CFD, because it has no daily financing charge. Cash CFDs are usually cheaper for intraday and very short positions because their spreads are tighter. The crossover depends on the provider’s financing rate and spreads.
Do index CFDs pay dividends?
Cash index CFDs on price indices apply dividend adjustments on ex-dividend dates: long positions are usually credited and short positions debited. Futures-based CFDs make no adjustment because expected dividends are already reflected in their price.
When do index futures expire?
Most major index futures, including those on the S&P 500, Nasdaq 100 and Dow Jones, expire on the third Friday of March, June, September and December. Futures-based CFDs are closed or rolled shortly before that date.
Related reading
Price your holding period first
Estimate how many nights you expect to hold, multiply that by the daily financing figure explained in swap rates on MT5, and set the total against the futures CFD's usually wider spread plus any quarterly roll.
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