Question: Overnight Swap Points Calculation formula of FX, Commodity, Index, Share and ETF CFDs
- What is Swap – Overnight Financing (Charges)?
- Swap can be credited and debited
- Swap Point Calculation of Forex currency pairs
- Another way of Swap Points (Charges) calculation of Forex currency pairs
- Examples of Forex Swap Points (Charges) Calculation
- Swap Points (Charges) calculation for Share, ETF, Index and Commodity CFDs
- Swap Points Calculation of Index CFDs
- Swap Point Calculation of Share and ETF CFDs
- Swap Point Calculation of Spot Commodities
What is Swap – Overnight Financing (Charges)?
When trading leveraged Forex pairs and variety of CFDs online, your open deals are subject to Overnight Financing at the end of each trading day.
This Overnight Financing may be subject to credit or debit, calculated on the basis of the relevant interest rates for the currencies in which the underlying instrument is traded, plus a mark-up.
Swap can be credited and debited
If the calculated Overnight Financing Percentage is positive, it means that an applicable amount will be added (credited) to your account balance.
A negative Overnight Financing Percentage means that an applicable amount will be subtracted (debited) from your account balance.
You can find the relevant Overnight Financing percentage, amounts and their related running times on both the Deal and Limit forms, under Tools, within the ‘Market Info’ tab.
To calculate the Overnight Financing, which your account will be debited or credited with, simply multiply the Overnight Financing percentage with the size of your deal.
If the CFD’s quoted currency differs from the account’s currency, it will be converted to the account’s currency.
How to calculate Swap Points (Charges) of Forex currency pairs?
Swap calculation for FX and CFDs are very similar.
The standard formula for Swap Calculation is as follows:
Swap = (One Point / Exchange Rate) * Trading Volume(Lot) * Swap Rate in Points
For a better understanding of the calculation, we have one example for you.
An Example of Swap Points (Charges) of Forex currency pairs
Here is an example of a Forex position carried over a night.
| One Point: | 0.00001 |
|---|---|
| Account Base Currency: | EUR |
| Currency Pair: | EUR/USD |
| Exchange Rate: | 1.0895 (EUR/USD) |
| Volume in Lots: | 5 (One Standard Lot = 100,000 Units) |
| Short Swap Rate: | 0.15 |
The final calculation will be the below:
| Swap Value = | (0.00001 / 1.0895) * (500,000 * 0.15) |
|---|---|
| Swap Value | €0.69 |
Swap calculation is more complicated than the calculation of margin or profit/loss which are much simpler.
If you are bothered to calculate by yourself, you may open a free Demo account with XM or use the free Trading Tool(Forex Calculator) in the XM official website.
Another way – Swap Points (Charges) calculation of Forex currency pairs
If the above calculation does not apply for your broker’s platforms, then there is another way to calculate the Swap Points (Charges).
Calculation of Overnight Financing Percentage when you Buy (Long Positions):
Overnight Financing Percentage = -(3M interest rate of the other currency – 3M interest rate of the base currency + Markup / 360)
Calculation of Overnight Financing Percentage when you Sell (Short Positions):
Overnight Financing Percentage = -(3M interest rate of the other currency – 3M interest rate of the base currency – Markup / 360)
To calculate the Overnight Financing Amount, simply multiply the percentage by the deal amount:
Overnight Financing Amount = Deal Amount × Overnight Financing Percentage
Examples of Forex Swap Points (Charges) Calculation
Example I – Forex Swap Points (Charges)
This example involves a situation whereby the Interbank Rate difference is HIGHER than the markup.
In such cases, your account will be debited when you go Long and credited when you go Short:
| Instrument | EUR/USD (Euro vs. US Dollar) |
|---|---|
| EUR (base currency) 3M interest rate (annualized) | -0.37% = -0.0037 |
| USD (other currency) 3M interest rate (annualized) | 1.08% = 0.0108 |
| Interbank Rates difference | 1.45% = 0.0145 |
| Markup (if applicable) | 0.75% = 0.0075 |
| Deal Amount value expressed in the other currency | 106,550 USD (100,000 EUR at Current Closing Rate of 1.0655) |
Overnight Financing Percentage when you Buy (Long Positions)
Overnight Financing Percentage = – (0.0108 – (-0.0037) + 0.0075 / 360) = -0.0000611 = -0.00611%
Overnight Financing Amount = 106,550 × (-0.0000611) = -6.51 USD, meaning 6.51 USD charge per day
Overnight Financing Percentage when you Sell (Short Positions)
Overnight Financing Percentage = (0.0108 – (-0.0037) + 0.0075 / 360) = 0.00001944 = 0.001944%
Overnight Financing Amount = 106,550 × 0.00001944 = 2.07 USD credit per day
Example II – Forex Swap Points (Charges)
This example involves a situation whereby the Interbank Rate difference is LOWER than the markup.
In such cases, your account will be debited each night regardless of your position’s direction:
| Instrument | GBP/JPY (British Pound vs. Japanese Yen) |
|---|---|
| GBP (base currency) 3M interest rate (annualized) | 0.39% = 0.0039 |
| JPY (other currency) 3M interest rate (annualized) | -0.09% = -0.0009 |
| Interbank Rates difference | 0.48% = 0.0048 |
| Markup (if applicable) | 0.75% = 0.0075 |
| Deal Amount value expressed in the other currency | 13,620,000 JPY (100,000 GBP at Current Closing Rate of 136.20) |
Overnight Financing Percentage when you Buy (Long Positions)
Overnight Financing Percentage = – ( (-0.0009) – 0.0039 + 0.0075 / 360) = – 0.0000075 = – 0.00075%
Overnight Financing Amount = 13,620,000 × (-0.0000075) = -102.15 JPY, meaning 102.15 JPY charge per day (≅1 USD)
Overnight Financing Percentage when you Sell (Short Positions)
Overnight Financing Percentage = ( (-0.0009) – 0.0039 – 0.0075 / 360) = – 0.000034167 = – 0.0034167%
Overnight Financing Amount = 13,620,000 × (-0.000034167) = -465.35 JPY, meaning 465.35 JPY charge per day (≅4.5 USD)
Example III – Forex Swap Points (Charges)
This example involves a situation whereby the Interbank Rate difference is LOWER than the negative markup.
In such cases, your account will be debited when you go Short and credited when you go Long:
| Instrument | USD/JPY (US Dollar vs. Japanese Yen) |
|---|---|
| USD (base currency) 3M interest rate (annualized) | 0.39% = 0.0039 |
| JPY (other currency) 3M interest rate (annualized) | -0.09% = -0.0009 |
| Interbank Rates difference | -1.17% = -0.0117 |
| Markup (if applicable) | 0.75% = 0.0075 |
| Deal Amount value expressed in the other currency | 10,341,000 JPY (100,000 USD at Current Closing Rate of 103.41) |
Overnight Financing Percentage when you Buy (Long Positions)
Overnight Financing Percentage = – ( (-0.0009) – 0.0108 + 0.0075 / 360) = 0.00001167 = 0.001167%
Overnight Financing Amount = 10,341,000 ×0.00001167=120.65 JPY credit per day (≅1.1 USD)
Overnight Financing Percentage when you Sell (Short Positions)
Overnight Financing Percentage = ( (-0.0009) – 0.0108 – 0.0075 / 360) = – 0.0000533 = – 0.00533%
Overnight Financing Amount = 10,341,000 ×(-0.0000533)=-551.52 JPY,meaning 551.52 JPY charge per day (≅5.3 USD)
Swap Points (Charges) calculation for Share, ETF, Index and Commodity CFDs
When trading leveraged Share, ETF, Index and Commodity CFDs with iFOREX, your open deals are subject to Overnight Financing at the end of each trading day.
This Overnight Financing may be subject to credit or debit, calculated on the basis of the relevant interest rates for the currencies in which the underlying instrument is traded, plus a mark-up.
Swap Points Calculation of Index CFDs
Example 1 – Index CFDs Swap Calculation
This example involves a situation whereby the Interbank Rate is HIGHER than the markup. In such cases, your account will be debited when you go Long and credited when you go Short:
| Instrument | Brazil Ibovespa |
|---|---|
| Brazilian Real (BRL) 3M interest rate (annualized) | 9.567% = 0.09567 |
| Markup (if applicable) | 2.5% = 0.025 |
| Deal Amount value expressed in currency | 127,380 BRL (2 Index contracts at Current Closing Rate of 63690 BRL per contract) |
Overnight Financing Percentage when you Buy (Long Positions)
Overnight Financing Percentage = – ((0.09567 + 0.025) / 360) = -0.0003351944 = -0.03351944%
Overnight Financing Amount = 127,380 × (-0.0003351944) = -42.70 BRL, meaning a 42.70 BRL charge per day (≅13.58 USD)
Overnight Financing Percentage when you Sell (Short Positions)
Overnight Financing Percentage = ((0.09567 – 0.025) / 360) = -0.00019630556 = 0.019630556%
Overnight Financing Amount = 127,380 × 0.00019630556 = 25 BRL credit per day (≅7.95 USD)
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Example 2 – Index CFDs Swap Calculation
This example involves a situation whereby the Interbank Rate is LOWER than the markup.
In such cases your account will be debited each night regardless of the direction of your position:
| Instrument | Oil (Crude Light WTI) |
|---|---|
| US Dollar (USD) 3M interest rate (annualized) | 1.08% = 0.0108 |
| Markup (if applicable) | 2.5% = 0.025 |
| Deal Amount value expressed in currency | 53,250 USD (1,000 Oil barrels at Current Closing Rate of 53.25 USD per barrel) |
Overnight Financing Percentage when you Buy (Long Positions)
Overnight Financing Percentage = – ((0.0108 + 0.025) / 360) = -0.00009944 = – 0.009944%
Overnight Financing Amount = 53,250 × (-0.00009944) = -5.30 USD, meaning a 5.30 USD charge per day
Overnight Financing Percentage when you Sell (Short Positions)
Overnight Financing Percentage = ((0.0108 – 0.025) / 360) = -0.00003944 = -0.003944%
Overnight Financing Amount = 53,250 × (-0.00003944) = -2.10 USD, meaning a 2.10 USD charge per day
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Swap Point Calculation of Share and ETF CFDs
Example 1 – Share and ETF CFDs Swap Calculation
This example involves a situation whereby the Interbank Rate is HIGHER than the markup.
In such cases your account will be debited when you go Long and credited when you go Short:
| Instrument | Gazprom (GAZP) |
|---|---|
| Russian Ruble (RUB) 3M interest rate (annualized) | 9.5% = 0.095 |
| Markup (if applicable) | 2.5% = 0.025 |
| Deal Amount value expressed in currency | 2,459,000 RUB (20,000 Shares at Current Closing Rate of 122.95 RUB per share) |
Overnight Financing Percentage when you Buy (Long Positions)
Overnight Financing Percentage = -((0.095 + 0.025) = -0.000333333 = -0.0333333%
Overnight Financing Amount = 2,459,000 × (-0.000333333) = -819.67 RUB, meaning a 819.67 RUB charge per day (≅14.60 USD)
Overnight Financing Percentage when you Sell (Short Positions)
Overnight Financing Percentage = ((0.095 + 0.025) / 360) = 0.000194444 = 0.0194444%
Overnight Financing Amount = 2,459,000 × 0.000194444 = 478.14 RUB credit per day (≅8.52 USD)
Example 2 – Share and ETF CFDs Swap Calculation
This example involves a situation whereby the Interbank Rate is LOWER than the markup.
In such cases, your account will be debited each night regardless of your position’s direction:
| Instrument | Apple (AAPL) |
|---|---|
| US Dollar (USD) 3M interest rate (annualized) | 1.08% = 0.0108 |
| Markup (if applicable) | 2.5% = 0.025 |
| Deal Amount value expressed in currency | 70,600 USD (500 Shares at Current Closing Rate of 141.20 USD per share) |
Overnight Financing Percentage when you Buy (Long Positions)
Overnight Financing Percentage = – ((0.0108 + 0.025) / 360) = -0.00009944 = -0.009944%
Overnight Financing Amount = 70,600 × (-0.00009944)= -7.02 USD, meaning a 7.02 USD charge per day
Overnight Financing Percentage when you Sell (Short Positions)
Overnight Financing Percentage = ((0.0108 – 0.025) / 360) = -0.00003944 = -0.003944%
Overnight Financing Amount = 70,600 × (-0.00003944) = -2.78 USD, meaning a 2.78 USD charge per day
Swap Point Calculation of Spot Commodities
Calculation of Swap points for CFD futures markets is a bit complicated than other markets’.
All finance adjustments for open positions in spot commodities are carried at or after 17:00 ET.
Finance adjustments are not made on open positions on CFD futures markets.
As you hold a position overnight (i.e. after 17:00 ET), a finance adjustment is made to your account.
This is calculated as follows:
f= (v * r) / d
Where:
| f | daily financing charge |
|---|---|
| v | notional value of underlying equity calculated based on closing price as determined by Royal |
| r | relevant interest rate, PLUS 250 basis points for long positions, MINUS 250 basis points for short positions, e.g. (0.50% + 2.50%) = 3.00% |
| d | number of days, i.e. we use 365 days for indices with denominated currency of GBP or AUD. |
Otherwise, we can use 360 days.
(Notional value = Price * Number of CFDs/Tick Value)
Long (buy) trade positions are debited the daily financing charge.
Short (sell) positions are normally credited the daily financing charge.
However, you will be debited and not credited with the financing charge when the relevant interest rate is less than the number of basis points to be deducted from that relevant interest rate.
A broker may credit short positions when LIBOR is greater than the basis points to be deducted from LIBOR.
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