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Levereged ETF, ETF inverse

Fatwaa ID: 1785

Question:
Assalamualaikum wa rahmatullahi wa barakatuh, I hope you are doing well, I had 2 questions regarding the stock market:

Is it permissible to trade/invest in a leveraged ETF where the underlying asset is halal(ex: Tesla 1.5x long)

Is it permissible to trade an ETF inverse of a stock, so you are not exactly shorting it but it goes up when the underlying asset goes down, even if this ETF is non leveraged.

Jazakummallahu khairan

Answer:
In the Name of Allaah, the Most Gracious, the Most Merciful.
As-salaamu ‘alaykum wa-rahmatullaahi wa-barakaatuh.

  1. A leveraged exchange-traded fund (ETF) is a marketable security that uses financial derivatives and debt to amplify the returns of an underlying index. Investing or trading derivatives is haraam. Accordingly, it is not permissible to trade or invest in a leveraged ETF.
  2. An inverse ETF is an exchange traded fund (ETF) constructed by using various derivatives to profit from a decline in the value of an underlying benchmark. Similar to the above, it is not permissible to trade inverse ETFs.

And Allaah Ta’aala knows best.
Mufti Muajul I. Chowdhury
Darul Iftaa New York
https://askthemufti.us/

03/11/1445 AH – 09/27/2023 CE | AMG3-4159

وصل اللهم وسلم وبارك على سيدنا محمد وعلى ءاله وصحبه أجمعين


https://www.investopedia.com/terms/l/leveraged-etf.asp

https://www.investopedia.com/terms/i/inverse-etf.asp

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