Speculation in trading is one of the long-term investment methods where financers meet with those who have the experience and in which money is paid to whoever works in it to achieve the greatest amount of gains and profits for both parties; profits are divided between them in proportions to be agreed upon.

Speculative legality

God Almighty has legislated speculation because of the benefits it brings to its parties. Among these benefits and gains is the increase in the livelihood inputs for both parties, whether the financer or the speculator (the one with experience), because both work as a complement to each other, and therefore this is due to the private and societal benefit, and on the other hand, it is an essential matter that is the development of money.

Elements of speculation

The pillars of speculation in trade are as follows:

• Request and acceptance between the two parties.
• The financer.
• The speculator is the one who acts according to his experience in this matter.
• capital.
• Profit (there are some people who argue that profit is not considered one of the pillars of speculation but rather one of the possible results and not a basic pillar). On the other hand, there are those who see its existence as a basis for speculation.

Terms of the speculation contract

One of the conditions for the speculation contract to be valid is that...

• The money should be invested in halal matters.
• An agreement is made on the percentage of profit from the beginning between the financier and the speculator, and that percentage is not from the capital but from the percentage of profit.
• There is no capital guarantee because it is a partnership between them, so the speculator shares his efforts and the financier his money. If there is a loss in the capital, it is borne by the financier, unless the loss is due to default or negligence on the part of the speculator, in which case he bears it.

Types of speculation in trading

In terms of scope of work, speculation is divided into:

The absolute speculation is in which the speculator is left free to act within the framework of the provisions of Islamic law and commercial custom and what leads to the goal of which is to achieve profits, so the financier pays to the speculator an amount of money to work in without specifying the type of work, place and time, nor specifying the capacity of those who deal with them.

This absolute speculation may be accompanied by a general authorization or express permission from the owner of the money for the speculator to perform some actions.

The restricted speculation is the one in which the speculator is determined by the financier to act within its limits related to the place, time, type of work, or persons the speculator deals with. The speculator is considered a violator if he does not abide by these restrictions.

When does speculation in trading terminate?

The circulation contract will terminate in one of the following cases:

• Due to the expiration date of the partnership between the two parties.
• Termination of the partnership contract before its expiry date at the desire of one of the parties, on the condition of mutual consent between the two parties to carry out this termination without any harm as application of the principle of the legal contract.
• Loss of speculation funds.
• The death of one of the partners or the incapacity of one of the parties, or the liquidation of the speculation between the two parties.