Why We Don’t Cover Futures & Options

Futures and options are contracts to buy or sell a stock at a set price on a future date — you never actually own the underlying shares. This is why Ansaar does not offer tools, data, or education for derivatives trading, and why the mainstream Islamic position holds them impermissible. What makes this module honest is that the financial case and the Sharia case point the same way: derivatives are ruinous for almost everyone who touches them, and they are ruinous for the same reasons they are forbidden.

What Are Futures and Options?

A futures contract is an agreement to buy or sell a stock or commodity at a fixed price on a set date. You do not own the stock — you are locked into a bet on where its price will be. Most traders close the contract before expiry, crystallising a profit or loss, and never take delivery of anything.

An options contract gives you the right, but not the obligation, to buy (a call) or sell (a put) at a fixed price by a certain date. You pay an upfront premium for that right. Again, most traders never own the underlying stock; they close the position for a gain or loss.

In both cases you are trading agreements about a future price, not a share of a real business. This is the crucial difference from how ordinary buying and selling of shares works, where you end up owning a slice of a company.

How Leverage Actually Works (a Worked Example)

The reason derivatives feel exciting — and destroy accounts — is leverage. You control a large position with a small deposit called margin.

Say Reliance trades at ₹1,000 and one futures lot is 250 shares, a contract worth ₹2,50,000. You do not pay ₹2,50,000. The exchange asks for margin of perhaps ₹40,000. So with ₹40,000 you control ₹2,50,000 of exposure — roughly six times your money.

When it goes your way

If Reliance rises 4% to ₹1,040, your contract is now worth ₹2,60,000. You made ₹10,000 on a ₹40,000 stake — a 25% gain from a 4% move. This is the story the guru screenshots always show.

When it goes against you

If Reliance instead falls 4% to ₹960, the contract is worth ₹2,40,000. You have lost ₹10,000 — 25% of your capital — on a completely ordinary one-day move. A 16% fall in the stock, which happens, wipes out your entire ₹40,000. In options, an out-of-the-money contract can lose 100% of its premium in days simply because time ran out, even if you guessed the direction correctly but the timing was slightly off.

Leverage is symmetric: it multiplies losses exactly as fast as gains. And losses arrive faster than most people can react.

What a Margin Call Looks Like

When your position moves against you and your margin falls below the required level, the broker issues a margin call — a demand to deposit more money immediately, often within hours. If you cannot, the broker squares off your position at the current market price, whether or not you wanted to sell there.

The cruel part is the timing. Margin calls hit hardest exactly when prices are gapping against everyone, so you are forced to sell at the worst possible moment, locking in the loss. You do not get to "wait for it to recover." The account can go to zero, and with some products you can even owe more than you deposited. There is no equivalent of this when you simply own shares you paid for in full.

The Numbers Nobody Selling a Course Will Show You

SEBI, India's market regulator, has studied individual traders in the equity derivatives segment. Its studies found that the overwhelming majority of individual F&O traders lose money — on the order of nine in ten over a year — and that aggregate net losses run into thousands of crores of rupees. The typical loser loses many times what the rare winner makes, once brokerage, exchange fees, and taxes are subtracted.

Why "trading gurus" sell courses

Ask a simple question: if a strategy reliably made money, why would anyone sell it to you for a fee instead of just running it quietly? The honest answer is that for most course-sellers, you are the business, not the market. Their income comes from course fees, subscriptions, affiliate links to brokers, and "signal" channels — a steady, low-risk cash flow — while their students face the nine-in-ten odds above. The screenshots are cherry-picked, the losing months quietly deleted. From an Islamic lens this compounds the harm: it is profiting by drawing people into maysir.

Why Derivatives Are Impermissible in Islam

The financial ruin above is not a coincidence. It flows from the same features that scholars object to.

Gharar (excessive uncertainty)

Islamic contracts must be clear about what is exchanged. Derivatives are built on not knowing the future price — the uncertainty is the product itself. This is the gharar that classical jurists prohibited, and derivatives are the example they would recognise instantly.

Maysir (gambling and zero-sum outcomes)

A derivative is a bet where your gain is precisely the counterparty's loss. No business is built, no product made, no service rendered. That is maysir — wealth transfer, not wealth creation. The nine-in-ten loss statistic is simply what a zero-sum game with fees looks like from the inside.

Riba (hidden interest)

Holding a futures position carries a cost of carry — effectively interest on the value you control but did not pay for. Option premiums decay with time in a way the seller earns like interest on a loan. Many scholars see these carry and financing costs as a form of riba.

The Mainstream Position and the Minority View

The consensus among major Islamic finance bodies — including the Islamic Fiqh Academy — and scholars across the Hanafi, Shafii, Maliki, and Hanbali schools is that speculative derivatives are impermissible. A minority of scholars permit narrowly defined, standardised futures when they serve genuine business hedging, such as a farmer locking in a crop price he will actually deliver. That carve-out does not reach retail F&O, which is cash-settled speculation. Because these are nuanced, case-by-case matters, consult a qualified scholar for any real hedging need in a business.

What About Delivery-Based Derivatives?

Some scholars argue a contract becomes permissible if you must take physical delivery of the underlying at maturity. In practice this rarely rescues Indian retail trading, because NSE F&O is overwhelmingly cash-settled — you never take delivery. Even where delivery exists, the leverage, margin, and gharar remain. Ansaar excludes derivatives wholesale to keep the focus on the clearest, most widely permissible approach: owning real businesses outright.

The Halal Alternative: Own Real Companies

Instead of betting on price moves, buy and hold shares of halal companies. When you own a stock:

• You own a real piece of the business and become a partial shareholder.
• The company's profits flow to you through growth and dividends — you gain when it succeeds, not when someone else loses.
• You fulfil the principle of al-kharaj bil-daman: return comes with genuine liability and ownership.
• You can hold for years without time decay, carry costs, or margin calls.

For a diversified, permissible portfolio, delivery-based equities can be paired with sukuk (asset-backed Islamic bonds), physical gold, and REITs for real estate exposure. Explore our halal stocks guide and screener to start.

Key takeaways

• Futures and options are contracts on future prices, not ownership of real companies
• Leverage multiplies losses as fast as gains, and margin calls force you to sell at the worst moment
• SEBI's studies found the large majority of individual F&O traders lose money — roughly nine in ten
• They are impermissible on three grounds: gharar (uncertainty), maysir (zero-sum gambling), and riba (carry costs)
• The halal alternative is buying and holding shares of real halal businesses for the long term

Quick quiz

Check your understanding

1. You put ₹40,000 of margin to control a ₹2,50,000 futures position, and the stock falls 4%. Roughly what happens to your capital?

You lose about 4%You lose about 25%You lose nothing because you did not sellYou gain because losses are capped

2. Which pair of Islamic concerns most directly explains why derivatives are impermissible?

Zakat and sadaqahGharar (excessive uncertainty) and maysir (gambling)Wudu and salahHalal and haram food rules

3. Why should you be sceptical of a 'trading guru' selling an F&O course?

Courses are always expensiveIf the strategy reliably worked, they would run it quietly rather than sell it; their income is course fees, not tradingGurus never use screenshotsSEBI bans all courses

Try it

Ready to understand another trading practice that Ansaar excludes? Learn why even same-day buying and selling — intraday trading — carries similar risks and is best avoided by most investors.