These contracts will also have expiration dates. The key benefit here is that if you don't buy the asset because the strike price is not met, even though you lose the fee you paid the premium , you are still probably better off than if you had bought the assets and then had to sell them at a loss. Say you are an investor in Tesla stock but you are worried the price may go down.

But you don't want to sell your shares. So using options give you a way to manage your risk. Let's take the opposite scenario. You are super bullish on Tesla.

You choose to buy an option as you only pay the premium up front and get more potential shares for your money. This is just a simple example to illustrate how traders can use options to speculate on price. As with other forms of trading, it is difficult to consistently make money trading options. You would need the asset to behave exactly as you predicted before the option contract expires which is no easy feat.

Options trading is generally seen as impermissible — this was covered on the IFG Fatwa Forum by Mufti Billal Omarjee and Mufti Faraz Adam here. Whether or not an option will be exercised is unknown at the time of agreement.

Scholars say the uncertainty present in options amounts to Gharar. You can find a more comprehensive discussion on Gharar here. Furthermore options trading is said to exhibit elements of Maysir gambling.

Both parties to an options transaction enter essentially betting against the other. These scholars liken dealing in option contracts as akin to a game of chance [1].

The contention from scholars with charging a fee for option contracts is due to a promise not being a valid subject of sale. This position is supported by the likes of the OIC Islamic Fiqh Academy and Mufti Taqi Usmani [2]. Some scholars have also said there is an element of interest involved when charging a premium as this premium is added to the price of the asset [3].

This is particularly relevant when the underlying asset is a currency. There is a minority view taken by some scholars that take the position that options trading is permissible. They also see no issue in charging for a promise [4]. Some scholars have advocated the use of Arbun as an alternative to a conventional option [5].

The key difference is in an Arbun contract, instead of paying a premium, a down payment is made. The buyer then has the choice to complete the rest of the purchase before the contract expires or forfeit the deposit.

Arbun thus gives the buyer the choice whether to proceed with a transaction but unlike conventional options, an Arbun cannot be traded. This is a unilateral promise to undertake something in the future but similar to an Arbun, this cannot be traded. We have some sympathy for the opposing views — i. those views that deem certain options to be permissible.

In cases of genuine need, for example currency exchange fluctuations for an international business with global supply chains, a more flexible, lenient approach is advisable. If you are such a person you should check in with a scholar about your particular circumstances.

Options can give investors other ways to hedge risk or make money but in general they are seen to be impermissible. Permissibility aside, most investors will be suited better by investing for the long term instead of trading.

Trading is a skilled profession that takes a lot of work to become really good at and the risks are substantial compared to long term investing. If you want to learn more about investing, check our Halal Investing Guides.

Access all our content with a free account Sign Up Already have an account? Sign in. With Islamic banking, there is no interest involved. Instead, Islamic banking transactions are based on 2 types of mutually beneficial arrangements called Mudharabah and Musharakah.

In contrast to conventional banking where you have the applicable charges and interest rate explicitly stated, a Mudharabah arrangement does not have any interest involved. Basically, the bank enters into a profit-sharing partnership with the investor depositor.

Because this is a partnership, the investor will also bear a portion of the losses if the investment is a failure. In essence, it is just like any ordinary partnership deal except that it extends to the relationship between a bank and an investor.

In other words, a Mudharabah arrangement allows Muslims to lend out their money in return for a profit just like conventional banks pay out interest to their depositors.

The key difference is the Mudharabah arrangement does not have the interest or charges explicitly stated like a normal arrangement.

In addition, both parties to the Mudharabah arrangement share the profits and the risk of losses together. The Musharakah arrangement is similar in concept to the Mudharabah arrangement except that the roles are reversed.

With the Mudharabah arrangement, the bank which enters into a joint venture with an individual or company is the investor. The profits under this arrangement are divided in accordance to the amount of capital that is contributed.

Once the loan amount has been fully paid up, the Musharakah arrangement will end between the bank and the individual. The Musharakah arrangement is usually adopted when an individual wishes to take out a mortgage to buy a property. With mortgages taken out under the Musharakah arrangement, the buyer enters in an arrangement with the bank to buy the property for a share of the rent paid by the occupier of the property which in this case is also the buyer.

Just like a normal loan agreement, the term of the partnership will be clearly defined at the start of the partnership arrangement. The idea of Islamic banking was only introduced into mainstream banking during the last decade when the UK began to adopt the concept of Islamic accounts.

The idea behind Islamic accounts was to enable Muslims to comply with Shariah law while they deal with the conventional financial banking system. Given the fact that the growth rate for Islamic accounts is thrice as fast as traditional bank accounts, many financial services providers have also begun to adopt the idea of Islamic accounts to serve their Muslim clientele better. Given the fact that a substantial number of financial traders are Muslim, Forex and Binary options have also started to offer Islamic trading accounts over the last years.

These accounts are tailored specifically for Muslim traders and are interest-free. A Muslim trader trading with an Islamic trading account will have access to all the trading assets that other types of trading accounts have with the difference being no interest charged on overnight positions.

Binary options offer a fixed payout if a trader correctly predicts whether the price of a security will rise or fall. But is binary options trading halal or haram? We provide an overview of Islamic finance principles and consider how they align with binary options trading.

We also list the best Islamic-friendly binary options accounts in Note, this article should not be construed as religious advice. Consult a local religious leader for individual guidance. Dukascopy offers binary options on currency pairs alongside powerful trading tools and market insights. The key pillars of Sharia Law are social justice, ethics, and using finance to help build communities.

But whether binary options falls within the remit of Islamic trading principles is not immediately clear. With that said, aspiring traders should pay particular attention to the following rules:. Below we look at how each of these principles aligns with binary options and whether trading should be considered halal or haram. Some binary options brokers offer market rate interest on uninvested cash balances. However, this is not permitted under halal values.

To alleviate this challenge, many brokerages now offer Islamic trading accounts, whereby no interest can be charged or earned on trading capital.

To comply with Islamic investing principles, trading accounts must also offer instant execution of trades and the immediate settlement of transaction costs. Not acting under the influence of greed is another important Islamic finance principle. This raises a challenge when trading binary options as emotions can run high and the temptation to chase greater profits can be difficult to resist. To help tackle this challenge, many traders utilise risk management alerts and tools, available at supporting brokers.

These allow you to lock in profits when a predetermined threshold has been met. Sharia Law does not permit participation in activities where there is excessive risk or uncertainty.

This involves speculation or gambling. This raises another interesting question when considered alongside binary options trading. Some argue that because binary options strategies are often based on assumptions, they are haram. However, there is another school of thought that believes the key consideration should be around the approach taken by the trader.

Wild speculation with no plan or strategy would indeed contradict Sharia Law. However, a carefully thought-through trading system with a robust strategy underpinning it is arguably halal. So, if the trader approaches binary options in a disciplined manner, then it may not be haram. According to Statista , 6. So unsurprisingly, the number of individuals turning to trading, including those making investments in binary options, is rising. In fact, Islamic finance and trading opportunities are one of the fastest growing financial services sectors in the UK.

In , the first Sharia-compliant robo-advisor, Wahed Invest, was launched in the United Kingdom, supporting investments in various markets, including ethically responsible stocks and Islamic Sukuk bonds.

And we expect to see more innovative investment solutions becoming available in the future, including Islamic-friendly binary options trading accounts. Today, several binary options brokers offer Islamic trading accounts for investors that follow the principles of Sharia Law.

These are also known as swap-free accounts. True Islamic-friendly binary options accounts will not permit the following:. UK investors can follow Islamic trading principles while still speculating on traditional and emerging financial markets with binary options. Halal accounts also encourage a disciplined approach to investing, with thought-through strategies that prevent greedy or hasty trading decisions. In addition, halal investing discourages overly frequent short-term speculation which could be viewed as a form of gambling.

The most important step to trade halal binary options is to find a broker that offers an Islamic-friendly trading account. As the retail product is banned by the FCA, British traders will need to turn to overseas or unregulated organisations.

Unfortunately, using an unregulated broker can increase the risk of scams. With this in mind, make sure you choose a trustworthy broker that offers access to a range of markets, provides competitive payouts, plus a transparent pricing schedule and on-hand customer support.

ai , for example, offers an Islamic trading account so you can enjoy interest-free binary options with no hidden charge.

Features include no rollover commissions for binary options contracts held over 24 hours and access to educational material.

Haram binary options contracts may involve speculating on companies associated with alcohol or tobacco, among other prohibited industries. With this in mind, it could be worth utilising halal screening tools. The Islamic Finance Guru offers several courses and tools for identifying Sharia-compliant companies as investment opportunities.

Whether binary options are considered halal or haram will vary depending on who you ask. Fortunately, several online brokers have introduced Islamic-friendly trading accounts which aim to comply with Sharia finance principles. See our list of recommended brands to start trading today.

And for further guidance, consult a local religious leader. A halal binary options strategy refers to the investment of money in accordance with Islamic finance principles.

Muslim traders should avoid investing in companies from haram industries, such as tobacco, alcohol and gambling. Investors should also ensure there are no interest charges. Some argue that trading binary options is halal if investments are executed following the principles of Sharia Law. The key values centre around avoiding gambling, greed or earning interest.

Dedicated Islamic-trading accounts aim to provide an investing environment that complies with these principles. Some critics view binary options trading as haram due to their speculative nature. Commentators argue that binary options contracts are often based on assumptions, with an outcome dependent on future events, which is not permitted under Islamic law.

However, others believe that you can use binary options products while complying with Islamic finance principles. Consult a local religious leader for further guidance.

British traders will need to find an offshore broker that offers Islamic-friendly trading accounts. Two popular platforms in are Alpari and Spectre. The FCA has banned the marketing and sale of binary options products in the UK. However, investors can still open halal binary options trading accounts with offshore providers. See our list of recommended brokers here.

Toggle navigation. Home Binary Options Trading. Halal Binary Options Brokers. Show Filters. Show Details. Filter Brokers FCA Regulated. Low Deposit. Signals Service. Islamic Account. MetaTrader 4. MetaTrader 5. Copy Trading. Spread Betting. Found 3 Brokers. Min Deposit. Demo Account. Alpari offers fix contracts on major markets with various contract types and payouts available.

What Are Halal Binary Options? Are Binary Options Halal? Are Binary Options Haram? How Can UK Investors Trade Halal Binary Options? Are Halal Binary Options Legal In The UK?

Halal Halal is a contrasting term to Haram. In other words, a Mudharabah arrangement allows Muslims to lend out their money in return for a profit just like conventional banks pay out interest to their depositors. Is Binary Options Halal and compatible with Islamic traditions? This is just a simple example to illustrate how traders can use options to speculate on price. However, a good strategic plan is required here. Trading is a skilled profession that takes a lot of work to become really good at and the risks are substantial compared to long term investing. IQ Option Being one of the fastest-growing binary brokers, IQ Option is not behind in offering Islamic trading account.

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