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ETF and Option Trading

Answered according to Hanafi Fiqh by Darulifta Azaadville

Question:

Is it permissible to invest in ETF?

Is it permissible to do option trading?

Answer:

ETF (exchange-traded fund) is a type of investment fund and exchange-traded product, i.e., they are traded on stock exchanges. 

An option is a contract giving the buyer the right, but not the obligation, to buy or sell an underlying asset (a stock or index) at a specific price on or before a certain date (listed options are all for 100 shares of the particular underlying asset). An option is a security, just like a stock or bond, and constitutes a binding contract with strictly defined terms and properties. 

Investing on the stock market is a controversial issue amongst the Muftis. Some of them permit investing on the stock market and others don’t. However, our Darul Ifta does not approve investing and trading on the stock market

In conclusion, we advise you to abstain from trading on the stock exchange whether directly or via a company that will be investing or trading on the stock exchange on your behalf.

Checked and Approved By:

Mufti Muhammed Saeed Motara Saheb D.B.

This answer was collected from the official Ifta website of Darul Uloom Azaadville, South Africa. Most of the answers are checked and approved by Mufti Muhammed Saeed Motara Saheb D.B.

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