Share CFDs or real shares?

⚠️ Risk warning: CFDs and leveraged forex are complex instruments with a high risk of losing money rapidly. Most retail accounts lose money. This content is education only, not investment advice or a recommendation.

Many Gulf brokers let you trade the same company in two ways: buy the real shares or trade a CFD on them. On the chart they look identical. In your account they behave very differently.

Real shares

When you buy a share you own part of the company. You receive dividends, can vote at meetings and can hold for years with no daily cost. You usually pay the full price in cash, so there is no leverage and no margin call. On Tadawul, the Saudi exchange, regular trading runs Sunday to Thursday, 10:00 to 15:00 Riyadh time (11:00 to 16:00 in Dubai).

Share CFDs

A CFD is a contract with your broker on the price difference. You do not own the share, cannot vote, and receive a cash adjustment instead of the dividend. In return you can:

use leverage: put down only a margin, often 20% of the position for shares;
sell short: profit if the price falls, which is hard with real shares;
trade from the same account as forex and gold.

The cost is overnight financing: a daily charge for every night you hold a leveraged position, plus spread or commission. Over months this can add up to more than the move you are trying to catch.

Worked example (illustrative price)

Saudi Aramco (2222) at SAR 25.00. Buying 100 real shares costs SAR 2,500 in cash. A CFD on 100 shares with 20% margin needs about SAR 500, but the exposure is still SAR 2,500.

If the price falls 10% to SAR 22.50, both lose SAR 250. For the share buyer that is 10% of the money used. For the CFD trader it is half of the margin. If the broker’s financing rate were 7% a year, holding the CFD would also cost about SAR 0.48 a night (2,500 × 7% ÷ 365).

Which one fits?

Long-term investing (months or years, dividends): real shares are usually simpler and cheaper to hold.
Short-term trading or going short: CFDs give flexibility, but leverage increases losses as much as gains.
Islamic accounts: some investors avoid leverage and interest-based financing; real shares in Sharia-screened companies or swap-free accounts are the usual choices. Ask a qualified scholar if unsure.

Whichever you use, check the broker is licensed by a regulator such as the SCA, DFSA, FSRA or CMA (see regulated brokers), and read the cost sheet before the first trade.

🛠️ Practice task

Use your broker’s cost sheet and a real chart. This is for practice, not for placing a trade.

Open the Saudi Aramco (2222) page and note the current price.
Work out what 100 real shares would cost, and the margin for a CFD on 100 shares at 20%.
Find your broker’s overnight financing rate for share CFDs and work out the cost of holding the CFD for 30 nights.
Calculate the loss in money and as a share of the money used if the price falls 10%, for both.
Write one sentence on which you would use for a one-week trade and which for a one-year investment, and why.