FINANCE

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KembaraXtra – Islamic Derivatives: Short Selling (Futures) vs Salam Contract


🔹 Short Selling in Futures Contracts (Notes)
  • Sell an asset without owning it
  • Enter a short position (agree to sell first)
  • Buy later at market price
  • Profit if price falls 📉
  • Loss if price rises 📈
  • Usually no physical delivery
  • Based on price speculation
  • ❌ Not Shariah-compliant


🔹 Salam Contract (Islamic Alternative) (Notes)
  • Buyer pays full amount upfront
  • Seller delivers goods in the future
  • Only delivery is delayed (allowed)
  • Involves real goods and trade
  • No excessive uncertainty
  • Used in agriculture and business planning
  • ✅ Shariah-compliant


🔹 Key Differences (Note Form)
  • Ownership
    • Short selling: ❌ No ownership
    • Salam: ✅ Proper ownership/obligation
  • Payment
    • Short selling: ❌ Deferred
    • Salam: ✅ Paid upfront
  • Delivery
    • Short selling: ❌ Often no delivery
    • Salam: ✅ Actual delivery required
  • Speculation
    • Short selling: ❌ High speculation
    • Salam: ✅ Minimal speculation
  • Shariah Status
    • Short selling: ❌ Not permissible
    • Salam: ✅ Permissible


🔹 Simple Overall Summary
  • Short selling in futures involves selling without ownership and speculation, making it not allowed in Islam
  • Salam is a valid Islamic contract where payment is made first and goods are delivered later, ensuring fairness and compliance with Shariah
 

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