Is speculating on Stock Market Movements haraam?

· 17 Safar 1427 AH1 min readFatwa 14067English

Question

Is speculating on Stock Market Movements haraam?

Salaam, Please could you tell me if we are allowed to participate in the following: ----------------------------------------------------------------------- "The stock market (FTSE 100) is showing a price of 5200/5202. You believe the stock market will fall so you place a down bet or 'sell' (with a brokerage) £20 per point at a bid of 5200. Your judgement was correct and the price of the stock market does fall when the market opens that afternoon. You decide to close the position at 5146 to realise your £1080 profit from the 54 point movement. However had the price moved against you and stock market is showing a price of 5252/5254 you would realise a loss" ------------------------------------------------------------------------------- The precise term for this type of transaction is called "financial spread betting".Is this any different to normal trading in shares? Here, what you are doing is speculating in the index as a whole instead of buying/selling individual shares in a particular company. You make your money if the stock market moves in the direction you predicted after careful research. Please could you tell me if this is islamically legal? I was considering doing this to try and raise some much needed money for college. w'salaam

Answer

The Darul Ifta is currently researching the aspect of investing in shares on the stock market.

Nevertheless, the financial spread betting concept on the stock market is similar to gambling. According to the Shar’ie Laws of trade and commerce, if the price or distribution of profit or loss is not certain, the deal will not be Shariah compliant. Therefore, apart from the permissibility of investing on the stock market, the financial spread betting option is not permissible.

And Allah Knows Best

Mufti Ebrahim Desai

Answered by
Mufti Ebrahim Desai
Questions about this ruling, answered only from the archive with sources.

Where scholars differ, it’s safer to take the more cautious view.

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