Dr. Monzer Kahf, a prominent economist and counselor, states the following: “Selling stock short is as follows: selling at the current price and borrowing the stock from the broker on interest. Stocks are delivered to the buyer at the time of the contract. At a later time, on the due date, stock is bought from the market and delivered to the broker in return for the previous loan.
Obviously, this transaction is interest-based. The fact is that goods are not sold for future delivery, but are actually being sold that day and are being delivered (as borrowed from the broker) and then bought while still in the same condition, on the due date so as to repay the loan. The reason for its prohibition is obvious: it is interest based.
What is meant by selling other equities short? For instance, it is permissible to sell cars, corn and soft drinks while specifying delivery at a future time and place with cash payment at the time of the contract. In Islamic fiqh this is called “salam”, and it is permissible.”
Selling Stocks Short: Permissible?
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