A has 100 shares of XYZ stock with today’s (8/30/02) market price of $100 per share. A makes a transferable contract (CALL) with B to sell XYZ stock for a set (STRIKE) price, say $100 per share, until (EXPIRY) 10/30/02 for which B pays A a non-refundable premium of $4.00 per share. B has the option to buy anytime until EXPIRY or not to buy and just lose $400. On 9/30/02, the stock is trading at $110 per share. B can buy the stock, for $10,000, and sell in the market for $11,000 ($600 profit) or wait until EXPIRY. He has a 3rd option of selling the CALL to C for $12.00 per share, which will allow C to buy the XYZ stock from A at $100 per share. The premiums depend on the STRIKE PRICE, AND EXPIRY DATE, and change daily. A sold CALL to B, B traded to C. Are both transactions Halal?
Neither of the two transactions are permissible. Both are Haraam.
and Allah Ta’ala Knows Best
Moulana Imraan Vawda
FATWA DEPT.
CHECKED AND APPROVED CORRECT: Mufti Ebrahim Desai