Islamic Accounts in Binary Options

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Is Binary Options Halal and compatible with Islamic traditions? This has become an important question for prospective Muslim options traders as the financial industry has become available to everyone through online trading accounts. The development binary options trading and sharia law online trading in the financial industry in the last two decades has opened up new horizons for retail traders of all races and creed. The life of a Muslim is guided by Sharia Law.

A Muslim is expected to abide by the Islamic principles covering all aspects of their life from social matters to economic matters that were expounded in the holy Koran. In the area of banking and investments, Sharia law strictly forbid the lending of money with interest. When Sharia law is applied to Binary options trading, this means interest that is earned or charged for an overnight position is prohibited as well.

In the spot financial markets, trading is done on a 24 hours basis. Binary options trading and sharia law 5 pm New York time, all open market positions are then rolled over to the next 24 hours cycle. This situation puts Muslim traders on a collision course with their religious beliefs. For example, instead of having an open market position rolled over automatically making overnight interest payable, open positions in Islamic trading accounts are closed by 5 pm New York time and then reopen immediately hence avoiding any interest payable for the fresh 24 hour cycle.

To help traders in their selection of brokers that offer Islamic trading accounts, we have compiled a list of leading binary brokers that offer Islamic trading accounts. It should be noted that the list above is by no means exhaustive but is just a guide. If someone used a Halal binary options account, but had little or no knowledge of what or how to trade, then they binary options trading and sharia law be using binary options to gamble — and this would certainly be Haram.

Only the individual trader can know whether this is the case. Please note that this site — binaryoptions. It appears that it might also be dependent on the skills of the individual trader, thus in reality binary options trading and sharia law it impossible for us to give advice on the matter. See the references below for further clarification. Is Binary Binary options trading and sharia law Halal or Haram? Immediate execution of trades Immediate settlement of transactional cost No interest payable on trades To help traders in their selection of brokers that offer Islamic trading accounts, we have compiled a list of leading binary brokers that offer Islamic trading accounts.

Other considerations If someone used a Halal binary options account, but had little or no knowledge of what or how to trade, then they would be using binary options to gamble — and this would certainly be Haram.

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Many traders across the globe have caught the binary options fever. It is amazing how in a few short years, the industry is now recognized as a credible and incredibly profitable sector of investment. While many traders can sign up with a broker and start trading without any doubts, such is not always the case with traders abiding by the Islamic faith. The Islamic faith, while it stretches to all corners of the world as one of the major religious beliefs, has many particularities according to Sharia law.

In relation to investments more specifically, Sharia law strictly forbids any type of lending of money with interest. When it comes to investing, Muslims are guided by the concept of risk sharing. In the literature of the Sharia law, two terms appear most frequently in relation to investments: Riba , meaning interest, is defined as a typical loan where the borrower, upon full repayment, will have paid the lender more than the original amount due to accumulated interest.

Riba under Islamic law is strictly forbidden. On the other hand, gharar is a financial term meaning risky or hazardous sale. In this case, a hazardous sale can be described as a transaction where the product being sold is either unknown or not clear.

As with riba , gharar is also prohibited under Islamic law, which forbids any type of trade that has an element of excessive risk and uncertainty. When it comes to trading, many brokers as we will explain below have found a way to work around the prohibition of riba. However, dealing with gharar is a bit trickier.

Since any type of investment involves a certain level of speculation within volatile markets, it is considered suspect. And because it is suspect, most interpretations of Sharia law forbid the activity.

Muslims interested in binary options often face a dilemma: This poses an issue since binary options can be traded on a hour basis. By the time 5pm rolls around NY time , all open market positions roll over to the following hour cycle. It is this very interest that makes the trade inherently haram for Muslims.

Fortunately, many brokers are starting to adapt to the various prohibitions by Sharia law in order to attract and retain the Muslim clientele. As such, any trader abiding by the principles of the Islamic faith may select a broker who offers an Islamic, no riba or Sharia account.

Since this is far from a black and white issue, Muslim traders need to have full confidence that brokers are able to accommodate their religious beliefs. Basic requirements for any trader, including Muslims, should involve finding a broker that is regulated in addition to being well respected within the binary options community and by other traders.

This type of account is unique in that it observes all the religious complexities of Sharia law. Islamic trading accounts are in accordance with restrictions of the Islamic faith. They have different pricing modalities than typical binary options accounts but they offer an exciting opportunity for Muslims to take part in trading. As such, open positions in Islamic accounts close by 5pm NY time and reopen immediately, thus avoiding any interest payable for the next hour cycle.

Since an Islamic trading account must respect certain variables, it is best to do your due diligence prior to signing up with any broker who advertises this type of account. In order to be a true Islamic trading account, the following four conditions must be met:. Overall, Muslims around the world have made it very clear that Sharia law comes first and above any type of investment. However, with a growing Muslim population willing and able to take part in binary options trading, many brokers have listened and are starting to cater to the specific needs of this group of traders.

Brokers have eliminated riba and as for gharar , the lines may still be blurred slightly but the large number of Muslim binary options traders suggests that the speculation risk involved in binary options is well tolerated given the specific account circumstances.

Sharia law is open to interpretation and as long as the principles you abide by coincide with how your broker of choice conducts business, there is no reason to doubt that you cannot get involved in the exciting world of trading binary options. This website is out of date, do not rely on it for current information about binary options. Riba and gharar Riba , meaning interest, is defined as a typical loan where the borrower, upon full repayment, will have paid the lender more than the original amount due to accumulated interest.

Relationship between Sharia law and binary options trading Muslims interested in binary options often face a dilemma: Options for Muslims Fortunately, many brokers are starting to adapt to the various prohibitions by Sharia law in order to attract and retain the Muslim clientele. In addition to this, Muslims have to search for brokers who offer Islamic trading accounts. Islamic trading accounts This type of account is unique in that it observes all the religious complexities of Sharia law. What to look for Since an Islamic trading account must respect certain variables, it is best to do your due diligence prior to signing up with any broker who advertises this type of account.

In order to be a true Islamic trading account, the following four conditions must be met: Instant execution of trades Instant settlement of any transaction costs No payable interest on all trades No upfront commissions Overall, Muslims around the world have made it very clear that Sharia law comes first and above any type of investment.

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