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Islamic Derivatives – Do Buyers Have to Receive the Commodity?
A. Theoretical Rule (Yes)
B. What Actually Happens (Important)
C. What Happens When They Exit Early
D. Who Receives the Commodity Then?
E. Important Distinction
F. Additional Reality
G. Why This Matters (Shari’ah Insight)
Final Takeaway
If you want, I can draw a simple timeline to make this crystal clear 👍
A. Theoretical Rule (Yes)
- In a futures contract:
- Buyer = obligated to receive the commodity
- Seller = obligated to deliver
- So if held until maturity:
- ✔️ Delivery must happen
B. What Actually Happens (Important)
- Most traders do NOT hold the contract until expiry
- They exit earlier by:
- Taking an opposite position
C. What Happens When They Exit Early
- Example:
- You buy a futures contract
- Before expiry → you sell the same contract
- Your obligation is cancelled
- You are no longer the buyer
- Someone else now holds the contract
D. Who Receives the Commodity Then?
- The last holder of the contract at expiry
- That person:
- ✔️ Must take delivery (if physical settlement)
E. Important Distinction
- You (original buyer):
- ❌ Do NOT receive commodity if you exit early
- Final contract holder:
- ✔️ Must receive commodity
F. Additional Reality
- Many futures are:
- Cash-settled
- Meaning:
- ❌ No physical delivery at all
- ✔️ Only money is exchanged
G. Why This Matters (Shari’ah Insight)
- Since most traders:
- Never intend delivery
- It leads to:
- Trading based on price differences only
- Raises concerns like:
- Gharar
- Maisir
Final Takeaway
- ✔️ Yes, buyer must receive commodity if they hold till expiry
- ❗ But in practice:
- Most exit early → no delivery happens for them
- 👉 Only the final holder faces delivery obligation
If you want, I can draw a simple timeline to make this crystal clear 👍
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