Is it Permissible to Trade in Binary Options?

Question:

Is it permissible to trade Binary Options?

In the Name of Allah, the Most Gracious, the Most Merciful.

As-salāmu ‘alaykum wa-rahmatullāhi wa-barakātuh.

Answer:

It is not permissible to trade in Binary Options.

The Fiqh (jurisprudence of the Answer):

Binary options are different to conventional options despite both being impermissible.  Once the option holder acquires a binary option, there is no further decision for the holder to make as to whether or not to exercise the binary option because binary options exercise automatically. Unlike other types of options, a binary option does not give the holder the right to purchase or sell the underlying asset.
In essence, an option holder is staking his wealth for a pay-out by betting on market conditions of assets and commodities.  The pay-out will depend entirely on the outcome of a yes/no proposition.
The yes/no proposition typically relates to whether the price of a particular asset that underlies the binary option will rise above or fall below a specified amount. For example, the yes/no proposition connected to the binary option might be something as straightforward as whether the stock price of XYZ company will be above $9.36 per share at 2:30 pm on a particular day, or whether the price of silver will be above $33.40 per ounce at 11:17 am on a particular day[1].   
Thus, binary options will not be permissible due to the element of gambling & staking one’s wealth on a yes/no proposition.  Furthermore, such a transaction has gross uncertainty (gharar) which has been categorically forbidden in Shariah.
Rather than the FCA (Financial Conduct Authority) regulating binary options, due to the gambling nature of the binary options, currently, the Gambling Commission regulates binary operators offering binary options if they have remote gambling equipment located in Great Britain[2].  

And Allah Ta’ālā Alone Knows Best

Mufti Faraz Adam 
www.darulfiqh.com
 
DISCLAIMER:
The views and opinions expressed in this answer belong only to the author and do not in any way represent or reflect the views of any institutions to which he may be affiliated.
Arguments and ideas propounded in this answer are based on the juristic interpretations and reasoning of the author. Given that contemporary issues and interpretations of contemporary issues are subjective in nature, another Mufti may reach different conclusions to the one expressed by the author. Whilst every effort has been taken to ensure total accuracy and soundness from a Shari’ah perspective, the author is open to any correction or juristic guidance. On the event of any juristic shortcomings, the author will retract any or all of the conclusions expressed within this answer.
The Shari’ah ruling given herein is based specifically on the scenario in question.  The author bears no responsibility towards any party that acts or does not act on this answer and is exempted from any and all forms of loss or damage.  This answer may not be used as evidence in any court of law without prior written consent from the author.  Consideration is only given and is restricted to the specific links provided, the author does not endorse nor approve of any other content the website may contain.