If an investor believes that the price of an underlying asset (for example, Tesco ordinary shares) will rise in the near future (perhaps because the investor considers them to be undervalued), they could buy these shares directly in the spot market. However, the investor has another choice to purchase CFDs based on the same Tesco ordinary shares opening a long position with a broker (‘going long’).
If the price of the underlying asset, such as Tesco equities, does rise as anticipated, the broker will credit the investor’s account with profits.