Muslim traders must choose who they invest their money into based on their faith. The reason for this is that Sharia law, or Islamic law, prohibits followers from earning or charging interest in any given situation, whether it’s in life or business. Gambling, or greed, is also not allowed.
Similar to the Forex industry’s early days, when FX options trading took shape and took off in popularity, the FX options industry forgot about one specific group: Muslim traders.
Is FX Options Trading Halal or Haram?
First, it’s important to understand there’s a significant difference between Forex and FX options trading. Because Islamic traders cannot be involved in interest, Forex brokers solved this problem by creating special accounts that charge no interest and no swaps, therefor, trading involved no actual transactions and is not considered Haram.
With FX options trading, however, there are no swap fees or interest by most brokers in the industry, so having access to interest-free trading accounts is not a problem. Potential conflict occurs when gambling or greed come into the picture.
Trading FX options without a strategy is considered gambling by most investors, so having no strategy in place is Haram. Also, there is a widespread belief that Muslim traders should avoid trading currency pairs altogether, and should only invest in stocks, commodities, indices, or futures. So in the eyes of many, trading FX options using currencies would be considered Haram.
Even if a broker offers zero interest, there are several additional elements Muslim traders should consider before trading FX options.
- Does this broker offer instant trade executions?
- Do they have a reliable track record among other Muslim investors?
- Do they have upfront costs or commissions?
- Do they seem like a professional service who respects the Muslim faith?
At the end of the day, FX options is a Muslim-friendly industry. It is up to the investor to keep in accordance with Sharia Law while trading FX options. Any trading activity should be ceased if investing translates to thoughts of making tons of money.
This specific debate has largely divided the Muslim community. But in the same way that non-Muslim’s will automatically label FX options trading as gambling, or a “scam”, Muslim individuals will do the same without hesitation.
FX options trading is not, in itself, Haram. Only the investor has the power to turn FX option investing into an unhealthy, sinful activity.