I have a question regarding online some online trading I have been doing. I have an account with “212 Trading”. I have been doing CFD trading with gold, where I use analysis of the market, to decide whether or not to buy or sell. If for example, the price of gold is $1300, and I believe the price is going up, I can buy at that price and wait, and if the price does go up, I make a profit. Alternatively, if I believe the price is going down, I can sell at $1300 and buy back at a lower amount, to make a profit (however due to the overall trend of the market going up, I avoid this). Leaving my positions open after 10pm incurs interest, so I always close my position before 10pm (even if I am in loss to avoid paying interest). The market re-opens at 11pm. I wanted to ask if this is permissible, if we avoid interest (by always closing before 10pm), and given that we are trading in precious metals, not haram industries, and that I use analysis to place my trades? Similarly, I have also been doing trading with bitcoin, i.e. trading on the price movement of bitcoin, but as that market is open 24/7, there is no need to close positions overnight, as there is no interest payable. Is this permissible? To add to the message. If this is not permissible, what shall I do with the profit I have made?
In the Name of Allah, the Most Gracious, the Most Merciful.
As-salāmu ‘alaykum wa-rahmatullāhi wa-barakātuh.
A CFD (Contract of Difference) is a tradable instrument that mirrors the movements of the asset underlying it. It allows for profits or losses to be realized when the underlying asset moves in relation to the position taken, but the actual underlying asset is never owned. Essentially, it is a contract between the client and the broker.[1]
In a CFD, the client does not become the owner of the shares. In fact, he does not receive any asset or service in exchange for the money he invests. He may gain money or he may have to pay more money (and also lose the initial amount) based on the difference of the value of the shares between the time the CFD contract opens and closes. Therefore, in essence, CFD is tantamount to exchanging fewer amounts of money for more, or vice versa.
Such an exchange is not permitted in the Shariah as it falls in the purview of Riba (interest).
CFD trading resembles Qimaar (gambling), in which two people agree that whoever loses the bet on an uncertain outcome, will pay the other a specific amount.[2]
And Allah Ta’āla Knows Best
Saad Haque
Student Darul Iftaa
New Jersey, USA
Checked and Approved by,
Mufti Ebrahim Desai
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[1] https://www.investopedia.com/articles/stocks/09/trade-a-cfd.asp (last accessed 2/12/18)
[2] الدر المختار وحاشية ابن عابدين (رد المحتار) (6/ 403) – ابن عابدين، محمد أمين بن عمر بن عبد العزيز عابدين الدمشقي الحنفي (المتوفى: 1252هـ) | دار الفكر-بيروت
(قوله لأنه يصير قمارا) لأن القمار من القمر الذي يزداد تارة وينقص أخرى، وسمي القمار قمارا لأن كل واحد من المقامرين ممن يجوز أن يذهب ماله إلى صاحبه، ويجوز أن يستفيد مال صاحبه وهو حرام بالنص،
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