Stock Options: Halal or Haram

Ethical investors are curious about Sharia position on stock options trading. As we mentioned in an article a couple of years ago, “Some scholars have allowed these if they are related to actual purchase or sale of an object but that they cannot be themselves traded for profit making.”

Options come under the broad category of derivatives which track market prices like interest rates, foreign exchange rates, commodity prices, stock price, etc. There is a variety of options and trading strategies. There are two primary uses of stock options, speculation and hedging.

The most common types of stock options are call and put. The purchase of a call option gives the buyer the right to buy a stock at a set price up to a certain date. Conversely, a put option allows the buyer to sell an asset at a certain price within the specified time. This would be a protection against the price of stock going down.

Discussion on permissibility of options could get very detailed. Instead of getting into that discussion, following is a link you can follow to determine for yourself.

https://islamicmarkets.com/education/option-contract-in-islamic-finance