subject: Islamic Trading Specifics [print this page] Islamic Trading Specifics
Islamic Trading Specifics "British American Tobacco (BTI)", "Nevada Gold & Casinos Inc (UWN)" and many other companies cannot be a subject of trading for Islamic investors. What's wrong with this? Unlike the usual trading in USA & GB, Muslim trading world or trading by Shariah has a lot of restrictions.
The major deviation between Western and Islamic financial markets is absolute no trading in risk. Actually, it is impossible to have short positions in Islamic World. You need to borrow the stock from your brokerage and sell it after that. But according to Shariah standpoint, in case a vendor wants to sell something, he must have it, at least. It is forbidden. Those involve huge risk without upper limit. Basically, you can lose even more money than you had on start. Secondly, margin trading. With a treat, the stocks may be bought together with margin and it becomes possible to pay interest to the brokerage.
Over all, it is even more risky operation as a short selling. So, it is prohibited as well. "Options involve risk and do not meet the case for all investors" this phrase is a known quantity for options traders. It gives the answer to the question: Why derivatives, such as options and futures, also cannot be operated. The stock trading issues. There's no actually the real investment.
Considered as ga**ling, because that you raise money on high-frequency price fluctuation. But the designated reasons do not visualize that you will not be able to invest your own money in 100 stocks. It is not very risky transaction, in fact. So why is it prohibited? The answer to the question is simple: when you purchase shares to a company, you become a shareholder, practically, and, as consequence, become a partner in the business.
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