Binary options contracts are prohibited in Islam
23-1-2014 | IslamWeb
Question:
My question is about binary options, where one predicts if the currency pair, commodity, indecies, etc will go up or down and you invest a certain amount of money on your prediction, if it is correct when the time of the option expires, you get a fixed return, if not then you don't getting anything at all or with some brokers you can cancel the trade before the expiry if you think your prediction is not going to be correct so you get some return of your money depending on how far you are wrong or right. A number of brokers of islamic accounts especially for muslims so no riba. Is this halal? I would like to add that currently i'm living on haram money and my husband is unable to get a job which is halal and enough for our living in this foreign country because of his lack of skills, qualifications and not being able to speak english. We really want to move to bangladesh to avoid the fitna in this country, especially if Allah azzawajal blesses us with children but because we don't have enough money for even the flight we are unable to do this. His income is very low, if he was unable to go to work for a week, after we pay rent and send money to support family in bangladesh, we would struggle for food.
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 
is His Slave and Messenger.
Binary options contracts are prohibited and it is not permissible to deal in them. The decision of the International Islamic Fiqh Academy No. 63, 1/7 reads: "Binary options contracts are not permissible in Islam, because the subject of the contract is neither money, nor a benefit, nor a financial right that is permissible to compensate; the same thing applies to futures contracts [contracts by which one buys the right to sell or buy in the future by paying a given amount] and the contract on the index."
Dr. Saalimi As-Suwaylim says: "The stock exchange options traded on global markets, whether they are purchase options (call options) or sell options (put options) are among the aleatory contracts which are Islamically forbidden. The resolution of the Islamic Fiqh Academy in Jeddah in 1992, number 63, decided the same thing."
What made these contracts to be among aleatory contracts is that their function is subject to the change of price, as they do not allow both parties of the contract to profit. For example, in the purchase option, the buyer pays a certain amount (premium) so that he has the right to buy stock or stocks at a fixed price throughout the duration of the option, then if the price of the market for these shares goes up when they are due, the buyer implements the sale and gains the difference between the market price and the implementation price (strike price). It is the same for the put option, as the owner of the shares pays a specific amount in return for him having the right to sell the shares at a fixed price throughout the duration of the contract. If the price of the market goes down at the time when it is due then the owner executes the sale, and so, he gains the difference between the market price and the strike price. Of course, this profit in itself represents a loss to the other party, because if the direction of change in price information is known in advance, the contract would not have been concluded, because it constitutes a real loss for one of the two parties. Therefore, the options are means of taking risk on prices. They are among the contracts that made the French economist Maurice Allais describe the global stock markets as huge gambling casinos. This is so because gambling is in fact that one of the two parties wins at the expense of the other; this is exactly what happens in binary contracts in international markets. This is contrary to ordinary transactions of buying and selling shares which do not involve an Islamic prohibition, because the sales contract is an immediate contract that ends as soon as the deal is concluded, and each party has full freedom to act after the contract, without any obligation of one party to the other. But as to a binary contract, it is a delayed contract whereby one party is bound to the other by bearing the risks of the price throughout the duration of choice. The contract is in reality that the origin of the option offers a commitment or guarantee to the other party for the implementation of the contract at the agreed price, so it is a contract of compensation on a guarantee of the price. It is for this reason that the option is considered among the insurance contracts in reality, as it is used for insurance in investment portfolios (portfolio insurance), and it is known that commercial insurance is an aleatory contract according to the agreement of all Fiqh academies, and the reason is the one in both cases, Allaah Knows best.”
Dear sister, the means of lawful earning are abundant for whoever wishes to seek them; Allaah says (what means): {And whoever fears Allaah—He will make for him a way out. And will provide for him from where he does not expect. And whoever relies upon Allaah — then He is sufficient for him.}[Quran 65:2-3] Besides, the Prophet said: "The Holy Spirit (Jibreel) has inspired to me that no soul will die until it has received its provision in full, so fear Allaah and be moderate in seeking provision, and no one of you should be tempted to seek provision by means of committing sin if it is slow in coming to him, for that which is with Allaah can only be attained by obeying Him.” [Ibn Marduwayh - Al-Albaani graded it Saheeh (sound)]
Therefore, you and your husband should seek lawful earnings as it is forbidden to consume ill-gotten money unless one finds himself/herself in case of dire necessity; Allaah says (what means): {….while He has explained in detail to you what He has forbidden you, excepting that to which you are compelled.}[Quran 6:119]
The necessity which renders what is forbidden permissible is when one reaches a point that if he does not consume what is forbidden he will die or nearly die or face an unbearable difficulty that cannot be borne except with great difficulty which cannot be repelled except by consuming what is forbidden; and the necessity is measured in accordance with its true proportions.
For more benefit on the necessity which makes what is forbidden permissible, please refer to Fataawa 90514 and 91257.