Is short selling halal?
No — you're selling shares you don't own, borrowed at a fee (often interest-bearing), which violates the direct prohibition on selling what you do not possess.
The hadith 'do not sell what you do not have' is about as on-point as source texts get. Shorting compounds it: the share borrow is a loan with a fee, margin requirements bring interest, and the strategy profits precisely from others' losses in a zero-sum wager. Every layer fails independently.
The legitimate insight shorting expresses — 'this asset is overpriced' — has a compliant expression: don't own it, and exit if you do. Inverse ETFs and put options are not workarounds; both are built from prohibited components.
The compliant alternative
Express negative views by not holding the asset; manage downside with sizing and diversification.
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Are inverse ETFs halal?
No — they manufacture short exposure through swaps and futures, inheriting the problems with an extra derivative wrapper.
Related
Educational summary of commonly held scholarly positions — not a fatwa or financial advice. Where scholars differ, we say so; for a binding ruling on your situation, consult your scholar. See how Penny screens.