Full Lecture Transcript (Cleaned)
What Are Stock Options? — 0:36
A brother from Bangladesh emails and asks: are stock options halal?
For those who are not aware, an option is a contract between two parties that gives the buyer the right to buy or sell a security at a predetermined price on or before a predetermined date. It gives you the right, but you don't have to exercise it — it gives you the option, but it is not obligatory.
The Core Problem — 1:01
In essence, what happens is that two people are basically gambling against each other. One party hopes that the price will go up, and the other party hopes that the price will go down. They are betting against each other — that's the only reason why the two would enter into this contract.
The Scholarly Consensus — 1:16
Because of this, the vast majority of modern scholars have ruled that options are impermissible (haram) under the Sharia. This includes:
- The Fiqh Academy Council of the Organisation of Islamic Cooperation (OIC)
- The European Fatwa Council
- AAOIFI (Accounting and Auditing Organization for Islamic Financial Institutions)
- And many other universally respected scholars in the field
Why Options Are Haram — 1:50
There are multiple problems involved with this contract. Most significantly:
Contrast With Direct Stock Ownership — 2:26
This is in contrast to the one who purchases stock directly. The one who purchases stock is a part-owner of the company. He wants the company to flourish and expects the stock to go up. He doesn't know the future, but the point is he's a part-owner — if the company goes up, alhamdulillah, so does his profit. If it goes down, that's the collective loss they all share. He's not betting against another person, and there's no uncertainty that would be haram.
Therefore, the majority position — the default position — is that stock options are not allowed because there is an impermissible level of Islamic uncertainty, a level of gambling. And Allah knows best.