Why options trading is haram?

Investopedia states that in Islamic finance, most derivative contracts are prohibited and considered invalid due to the uncertainty involved in the future delivery of the underlying asset. Most Islamic scholars agree that the options have characteristics of speculation and gambling. In addition, options trading is said to exhibit elements of Maysir (gambling). Both parties to an options transaction essentially enter by betting against the other.

These scholars compare option contract trading as a game of chance. Options (stocks, assets, etc.) are considered haram, as they are based on ambiguity and speculation. Islam insists on mutual benefit and, in options trading, one entity benefits at the expense of the other party. This type of transaction is included under the heading of prohibited transactions that it is not allowed to initiate or trade.

As we said earlier, there is no definitive answer for options trading to be halal or haram. While many people consider options trading to be halal and therefore participate in the options market, there is a significant population who consider that it is not in accordance with Islamic principles. Trading CFDs or binary options is certainly prohibited, since you don't own any part of the asset. Options are a type of derivative, which are all zero-sum games.

Sheikh Yusuf DeLorenzo has a similar view, stating that this type of economic activity is clearly prohibited by the shariah. In any case, to be able to trade options, you will need a significant amount of money in your broker account (more than 100,000) and a sufficient margin. The seller (or buyer) of an option can close his position, but only if there is a willing participant on the other side of the trade: a willing buyer (or seller). Therefore, what is sold is the option itself, and this contract is binding on one of the two parties, namely the seller of the option, while it is not binding on the other party, that is, the buyer of the option.

On the one hand, you say: “The option contract can only continue when both the seller and the buyer agree to proceed and then say “YES NO”, the seller or the buyer can terminate and close their option contract at any time they wish to. Options trading not only involves a risk for the individual, but it is also used to speculate on the price of the underlying asset, making it a bet. The option contract can only continue when both the seller and the buyer agree to proceed; otherwise, the seller or the buyer may terminate and close their option contract at any time they wish to do so. Just because it's good doesn't make an exchange halal, I guess and I expect an opinion that just because it's an option doesn't make it haram.

In both put and call options, this is exactly what happens, and that is why many religious scholars say that options trading is Maysir, which means gambling. A binary option is an exotic financial option in which the result is a fixed monetary amount or nothing. From what I understand from your post is that options trading becomes halal if you have the underlying stocks and if you are hedging the risk. In the case of the call option, the buyer pays a specific amount (the premium) so that he is entitled to purchase the stock or shares at a fixed price during the option period.

When both sides of options contracts speculate on the price of the underlying, the option creates no use for anyone. This is an agreement that gives the buyer of this option — who is the owner of the financial certificates — the right to sell a specified number of shares or other financial certificates for a specified price within a specified period, but is not obliged to sell, so it is optional. In the stock market, options trading is based on the charging of commissions on pledges, which are not valid according to Sharia rules. .