At XTB, they not only offer currencies, commodities, and indices, but they also have synthetic stocks (STK) and equity CFDs as well. It is important to understand the difference between these two products as they offer flexibility to suit your trading style.

Let’s see how you can operate with the largest companies without having to own their shares.

What are Synthetic Stocks (STK)?

Synthetic stocks are the most innovative derivative products in stocks, which behave like stocks, but they also offer you additional advantages that are not available when you trade normal stocks. By trading synthetic stocks you are not using leverage, which means that they have no position holding costs (or added swap points). In addition, it also means that you cannot lose more money than the initial deposit you have made.

Here we summarize some of the most important factors about synthetic stocks:

  • Synthetic Shares are CFDs, which means that they are instruments based on the price of the specific share. It also means that by buying the synthetic shares you do not become a shareholder in the company.
  • Unlike CFDs, keeping the position open is free and has no added swap points.
  • Synthetic stocks, unlike CFDs on stocks, are not leveraged – so your losses will not exceed the amount of your initial deposit.
  • Investors with long positions will receive a net equivalent to a dividend payment from the company.
  • Closed positions are liquidated immediately.

By investing in synthetic stocks with XTB, you will gain instant access to the largest equity markets without the need to create multiple trading accounts with multiple brokers.

Invest in Synthetic Stocks with XTB

What are CFDs on stocks?

The term CFD stands for “contract for difference”. CFDs allow you to take positions in any of the securities of a financial market – for example, a stock, commodity, currency pairs, or stock indices – whether it rises or falls, whether in the short or long term. As such, a CFD on shares allows you to trade shares of a specific company.

With CFDs the financial asset does not belong to you – you are only speculating on the movement of its price. Therefore there is no cost of the physical deal as with the UK Stamp Duty. Unlike synthetic stocks, CFDs are leveraged products, which means that you only have to make a small initial deposit in order to gain much more market exposure. This is the biggest (and indeed the only) difference between CFDs on stocks and synthetic stocks. By trading synthetic stocks you are not using the leverage that is available with trading CFDs on stocks.

Invest in CFDs on stocks with XTB