Overnight CFD financing is the cost charged for keeping a position open past a broker’s daily close. This cost is not a single figure valid everywhere: it is a formula that combines a reference rate tied to the underlying’s currency and a margin set by the broker itself. Understanding this mechanic is useful for any trader simulating a challenge who holds a position for several days, including over a weekend.
What the cost of carry covers
The cost of carry is not specific to CFDs. Depending on the product, it can take several distinct forms. IG’s glossary describes it this way: the cost of carry corresponds to the additional amount you must pay to keep a position open, in the form of overnight financing fees, interest on hedges and forex transactions, or storage costs for commodities in respect of a future’s delivery. For a CFD on a stock or an index, it is this first form, overnight financing, that applies.
The formula at one broker: two components
At IG, as an example documented by the broker, overnight financing on stock and index CFDs breaks down into two elements: a reference rate tied to the underlying’s currency, and an administrative margin set by the broker. IG’s documentation states it this way: for stock and stock index trades, financing charges include administrative fees plus or minus the reference interest rate applicable to the currency in which the underlying market of the trade is denominated, depending on whether the position is long or short. In practice, a trader in a long position generally pays the rate plus the broker’s margin, while a short position may see the margin deducted from the rate, resulting in a positive or negative balance depending on prevailing levels.
For some more complex instruments such as volatility indices, IG documents a different formula, based on the basis between two futures prices and an annual fee prorated by number of days. A worked example from this same documentation illustrates the calculation: on a short position of 100 contracts, with a basis of 0.03 euros and a fee of 0.001 euros, the resulting adjustment is 2.9 euros credited to the account. This calculation is specific to this instrument and this broker; it does not carry over as such to a stock CFD.
Why the weekend causes one day to be charged triple
The market does not close over the weekend in the sense that positions remain exposed to price moves at reopening, but brokers generally do not charge financing on Saturday and Sunday as such. To compensate, they bundle this cost onto one specific day. At IG, for stock and index CFDs, that day is Friday evening: positions kept open after 11pm Paris time on Friday are adjusted for three days of financing to cover the weekend.
On forex, however, the day used is not Friday but Wednesday, due to the T+2 settlement convention specific to this market. IG explains this for its Swiss clients: for any position opened before 11:00pm CET on Wednesday that remains open after 11:00pm CET on Wednesday, the daily interest credit or debit will be applied for three days rather than one, this adjustment covering the closure of trading over the weekend period. This offset illustrates well the variable scope of the rule: the principle (compensating for days not charged) is general, but the exact day on which the triple applies depends on the asset and the specific workings of the broker.
What this mechanic means for a trader in a challenge
Three points remain valid regardless of the broker consulted, even if the exact figures differ:
- Overnight financing is never a fixed universal amount: it varies according to the direction of the position, the underlying’s currency, and the broker’s pricing policy.
- One day of the week generally carries a multiplied cost, typically three times, to compensate for the days not charged over the weekend, but this day differs between forex and other asset classes at the same broker.
- The leverage applicable to the underlying influences the magnitude of this cost in absolute terms since it determines the size of the position exposed to financing. In France, the Autorite des marches financiers notes that since August 1, 2018, the leverage available on CFDs offered to retail clients is capped according to the nature of the underlying, for example 30 for major forex pairs, 5 for stocks and 2 for cryptocurrencies.
For a trader evaluating a multi-day carry strategy as part of a funded trading challenge, this cost should be factored into the profitability calculation before opening the position, not after. It adds to other risk management mechanisms worth knowing, such as the difference between a stop order and a stop-limit order or the logic behind the 50% margin close out.
What this article does not cover
This explanation relies on the public documentation of a single broker, IG, used as an example to illustrate a general mechanism. It does not give the actual rates or margins applied by other brokers, which may choose a different triple-financing day, a different cutoff time, or a distinct fee structure. Before holding a position for several days, checking the exact detail applied by the broker actually used remains necessary.