Islamic laws strictly prohibit all forms of gambling or lending at interest: these activities are considered haram, so every devout Muslim wants to avoid them. But when it comes to derivatives, a contradiction arises: should we consider binary options a form of gambling? Many people claim that the outcome is random here, so all these instruments should be avoided by any true followers of Islam. But does that logic actually apply here? Let’s find out.
What halal means
Islamic teachings force their followers to comply with a strict code of conduct that specifies numerous prohibited activities. There are two kinds of forbidden things called haram and makruh, and everything not included in those two categories is considered halal, or allowed. While the Quran and the Sunnah define all the prohibited things in detail, the modernity creates many concepts that are completely new and don’t seem to easily fall into those categories.
What’s wrong with binary options
Binary options are derivative trading instruments based on an underlying asset. Basically, you place a bet on that asset’s price movements and wait for the outcome. If you’re right, you’ll make a profit. And if you’re wrong, you’ll lose your stake. There’s always uncertainty involved, and any deal can have just two possible outcomes: you either win or lose. That’s why some people think that this is essentially an elaborate form of gambling, so it should be completely forbidden.
Why binary options are halal
Derivatives can be extremely profitable, so many Muslim traders all around the world keep wondering: are binary options halal or not? Actually, there are several good reasons to prove that. First of all, you need to predict price movements to make successful deals, and that involves a certain level of skill, so any outcome is not completely random. And you don’t really bet on anything, you make an investment based on your predictions and calculations, and this should not be forbidden.
There are also critics who view binary options as a form of usury. But that’s not correct: you don’t lend money to anyone, you invest your own funds to make a profit, but there’s no fixed interest involved. If you’re planning to trade binary options in Muslim countries, make sure to learn first how they treat the subject: some of them view them as halal, but others may not be so benevolent.
