In stock market trading, is short selling stocks permissible?

In the Name of Allaah, the Most Gracious, the Most Merciful.

As-salāmu ‘alaykum wa-rahmatullāhi wa-barakātuh.

Short selling is essentially borrowing an item and selling it at market value with the hope the value of the borrowed item will decrease. The borrower will purchase a similar item for a lower price and return the item to the owner, therefore making a profit from the sale based on the market value[1].

For example, A borrows a BMW from B which is the value of R300 000, A then sells the BMW for R300 000 and owes B a BMW. A waits for the BMW market to drop and then buys the same kind BMW for R250 000 and returns it to B.

We understand from the example that A sold a BMW which he did not own, it was rather borrowed to him.

Accordingly, short selling is not be permissible since it entails selling something which is merely borrowed and not in one’s ownership[2].

And Allaah Ta’aala Knows Best

Muhammed Al-Ameen Bin Moulana Ismail Akoo

Student, Darul Iftaa

Newcastle; KZN, South Africa

Checked and Approved by,
Mufti Ebrahim Desai.