Answered by: Maulana Syed Johir Miah
Question
Assalamu Alaikum Sheikh Sahab, hope you are doing well. Just a quick question: Are options (derivatives) trading halal in your opinion?
In the name of Allah, the Most Gracious, the Most Merciful
Answer:
Derivative trading is when traders speculate on the future price action of an asset via the buying or selling of derivative contracts with the aim of achieving enhanced gains when compared with buying the underlying asset outright.
The trading of options as in fashion in the stock markets is not allowed in Shariah.
The reason being is that the option is not something that is concrete or specific which can be purchased or traded as traders speculate on the future price action of an asset.
Also, this operation has a component of gambling within itself by the nature of business.
Allah (عز و جل)says in the Quran;
يَٰٓأَيُّهَا ٱلَّذِينَ ءَامَنُوٓا إِنَّمَاٱلْخَمْرُ وَٱلْمَيْسِرُ وَٱلْأَنصَابُ وَٱلْأَزْلَٰمُ رِجْسٌ مِّنْ عَمَلِ ٱلشَّيْطَٰنِ فَٱجْتَنِبُوهُ لَعَلَّكُمْ تُفْلِحُونَ ﴿٩٠﴾
إِنَّمَا يُرِيدُ ٱلشَّيْطَٰنُ أَن يُوقِعَ بَيْنَكُمُ ٱلْعَدَٰوَةَ وَٱلْبَغْضَآءَ فِى ٱلْخَمْرِ وَٱلْمَيْسِرِ وَيَصُدَّكُمْ عَن ذِكْرِ ٱللَّهِ وَعَنِ ٱلصَّلَوٰةِۖفَهَلْأَنتُممُّنتَهُونَ﴿٩١﴾
O you who believe! Intoxicants and gambling, (dedication of) stones and (divination by) arrows, are an abomination of Satan’s handwork: Abstain from such (abomination), that you may prosper. Satan’s plan is (but) to excite enmity and hatred between you with intoxicants and gambling, and hinder you from the remembrance of Allah, and from prayer: Will you not then abstain?” (Surah Maidah, Verse 90-91)
Additionally, these derivatives have brought adverse consequences on the financial system. Hence, in the aforementioned case, options (derivatives) trading will not be halal in my opinion.
Only Allah knows best.
Written by Maulana Syed Johir Miah
Checked and approved by Mufti Mohammed Tosir Miah
Darul Ifta Birmingham