Trading in stocks and interest
Fatwa No: 82020

Question

I trade in stocks. Please let me know if the following are halal or haram: 1. a margin account (an account that lets me borrow for a few hours, days or months to buy stocks. The money has to be repaid with a variable interest); 2. day trading (buying and selling the same stock in one day or over a short period of time)? 3. futures and commodities?

Answer

All perfect praise be to Allaah, The Lord of the Worlds.  I testify that there is none worthy of worship except Allaah, and that Muhammad, sallallaahu ‘alayhi wa sallam, is His slave and Messenger.

The first situation you described is pure Ribaa (usury or interest) and so it is forbidden in Islam. Allaah Says (what means): {Allaah has permitted trading and forbidden Ribaa.}[Quran 2:275] 

Buying and selling the shares daily or over short periods of time is lawful if the shares are of something that could be lawfully traded according to Islam and if the buying and selling are themselves subjected to Sharee'ah rules.

The answer to the third question is as follows: 

1- If what is sold is silver, gold or currencies, it is forbidden to trade in them unless they are exchanged directly from hand to hand (i.e., immediate exchange) as Prophet Muhammad , said: “Gold for gold and silver for silver and wheat for wheat and barley for barley and dates for dates and salt for salt, the analogous by their analogous, the same amount by the same amount exchanged from hand to hand. But if these kinds are different, trade as you wish but from hand to hand.” [Muslim]

2- If what is bought or sold is food or furniture, it is lawful to buy it and have it delivered later on the condition that its amount is known and its descriptions well defined and the price should not be in food if what is bought is other food due to the previous Hadeeth. It is also forbidden to sell it before actually having it in one’s own hand, as stated in Al-Bukhari and Muslim. There are other details concerning this issue in the Fiqh (Islamic Law) books.

We advise you, dear brother, when undertaking any such transactions, to ask the Fuqahaa (Islamic jurists) as this might include a forbidden thing that might not be obvious to everybody.

Allaah Knows best.  

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