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
CHECKED AND APPROVED CORRECT: Mufti Ebrahim Desai