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Subject : Ruling on Trading Currencies Using Option Contracts
Fatwa Number : 3732
Date : 16-11-2022
Classified : Current Financial Issues
Fatwa Type : Search Fatawaa

Question :

What is the ruling of Sharia on trading currencies using option contracts?



The Answer :

All perfect praise be to Allah the Lord of the Worlds. May Allah`s peace and blessings be upon our Prophet Mohammad and upon all his family and companions.

The view of the Islamic legislation on option contracts depends on understanding the reality of these contracts. Option is a compensation for merely the right to complete or rescind a contract. In fact, these contracts are used as a precaution against change in prices, so the purchaser of this right uses them to avoid the rise or decrease in prices at the expense of the other party. Both the purchaser and the seller bet on the rise or decrease in prices, so whoever makes the right guess wins while the other loses. Every exchange contract in which each party bets on the loss of the other is considered gambling and eating up people`s wealth unjustly. Allah the Almighty says {What means}: "And do not eat up your property among yourselves for vanities." {Al-Baqarah, 188}. 

In addition, the object of the contract-in these contracts-is merely the right to complete or rescind the contract, so it doesn`t represent a specific item, a benefit, or a financial right. Accordingly, it isn`t permissible to be contracted.

It says in a resolution of the Islamic Fiqh Council, no. 63 (1/7): 

"Option contracts – as they are known today in the global financial markets – are a new kind of contract that does not come under the heading of any kind of sharia contracts. 

Because the object of the contract is not a specific item or benefit, or a financial right that could be compensated with something else, this type of contract is not permissible according to Islam. 

As these contracts are not permissible in the first place, it is not permissible to deal in them."

Sharia standard No.(20) states: " Because the object of the contract is not a specific item or benefit, or a financial right that could be compensated with something else, this type of contract is not permissible according to Islam."

Consequently, it isn`t permissible to deal in the so-called option contracts. And Allah the Almighty knows best. 






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