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Options trading involves a contract that grants one party (the option holder) the right to buy or sell a financial asset at a specified price, within a specified period or on a specified date. The option holder is not obligated to buy or sell; they merely hold the right, which they can choose to exercise or not. They acquire this right by paying a premium, and the other party in the contract is obligated to buy or sell if the option holder decides to exercise the option.

Islamic Rulings on Options Trading

The majority of contemporary scholars and Islamic financial institutions prohibit options trading. This ruling has been endorsed by several bodies, including:

• The International Islamic Fiqh Academy: They declared that options contracts, as they are currently traded in global financial markets, are not permissible because the subject matter of the contract is neither a tangible asset, a usufruct, nor a financial right that can be legally exchanged.
• Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI): Their standards prohibit options trading on stocks.
• Al Baraka Seminar on Islamic Economics: They also ruled against the permissibility of options contracts.

Key Evidence for Prohibition:

1. Lack of a Valid Subject Matter: The option contract involves a right that is not considered a tangible asset or a financial right recognized in Islamic jurisprudence. It is created by the contract itself and does not relate to a physical asset or a usufruct.
2. Absence of Ownership Transfer: Most options contracts do not result in the transfer of ownership of the underlying asset or the payment of the agreed price. Instead, they are often settled in cash, which contradicts the principles of sale in Islamic law.
3. Gharar and Maysir: Whether or not an option will be exercised is unknown at the time of the agreement, introducing significant uncertainty (Gharar). Additionally, options trading is said to exhibit elements of gambling (Maysir), as both parties are essentially betting against each other. This speculative nature likens options trading to a game of chance.
4. Issue with Premiums: Scholars contend that charging a fee for option contracts is problematic because a promise is not considered a valid subject of sale in Islamic finance. This position is supported by the OIC Islamic Academy.

Resolutions by Islamic Jurisprudence Councils and Institutions

1. International Islamic Fiqh Academy: During its seventh session in Jeddah, Saudi Arabia, in May 1992, the academy concluded that options contracts, as they are practiced in contemporary financial markets, are not permissible in Islam.
2. AAOIFI Standards: These standards explicitly prohibit entering into options contracts on stocks.
3. Al Baraka Seminar: The seminar reaffirmed the prohibition based on the non-permissibility of trading in rights that are not recognized as tangible or financial assets in Islamic jurisprudence.

Binomo is an online trading platform that allows users to trade various financial instruments, primarily through binary options, where traders predict the price movement of financial assets over a short period. The outcome is binary, meaning traders either win a fixed payout or lose their investment based on the prediction.  The trading in this platform is highly speculative and involves high risk while it violates all the above said Islamic rulings. 

Conclusion

According to the majority opinion of contemporary Islamic scholars and the resolutions of prominent Islamic jurisprudence councils, options trading as it is currently practiced is not permissible in Islam. The primary reasons are the lack of a tangible subject matter, the speculative nature of the contracts, and the absence of actual ownership transfer, which contravene fundamental principles of Islamic finance.

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