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.
Check your own portfolio
Penny categorizes everything you own — stocks screened live against AAOIFI-style rules with rule-by-rule screening during the free trial and subscription, asset classes tiered like this page, zakat and purification built in. No bank login.
Download Penny for iOSFAQ
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.