According to the definition of the US Securities and Exchange Commission, the short selling is act of selling those securities that the seller is not the owner of them, in fact it is the sale of shares which are either borrowed by the seller or borrowed by the broker on behalf of the seller. The seller of the short position by buying stock or using stock that he owns, returns the borrowed stock to the lender later.

The short selling contract is based on usury and cannot be used in the Islamic capital market. The Shariah Committee has suggested the following solutions for short selling:

1- The Method of Combining Cash Sale and Salaf (Forward Sale)

According to the view of the committee, it is possible to achieve an instrument such as the short selling of shares through the simultaneous execution of a cash sale contract and the purchase of Salaf stock. First that the owner of the stock sells his share to another person at the daily price in cash, then he buys the same amount of shares from that person in the Salaf way. The price of the Salaf is determined in a way that in addition to the expected profit of the shares, more price is considered for the owner of them, so the owner of the stock would be motivated to sell the shares.

2- Sales Combination Method with Two Options

During this transaction, the shares are transferred from the first owner to the second one. The contract between these two people is of the type of sale ( bay’). Hence all the rights related to the share are transferred to the second owner (instead of the short seller) according to the form of this contract.

In order to create other standard short selling conditions with the sale contract, the two-option contract is implicitly stipulated in the sale contract. The first condition is the purchase option in which the second owner gives shares to the first owner to be able to buy the sold shares at the transaction price until the specified maturity. The second condition is an option that the first owner of the shares gives to the second owner, and based on this option, the second owner has the option to sell the purchased shares to the first owner of the share at the transaction price until the specified maturity.

In the share sale agreement with two options;

. The fund as a guarantee that the parties put to eliminate the risks of the option trading conditions is a valid collateral.
. The adjustment in the option contract in case of taking corporate actions regarding the share could be permissible in terms of the implicit condition if it is done through numerical adjustment in the number and price of the underlying shares in the option contract.
. The termination of one of the options is permissible if another option is applied as an implicit condition.
. The price gap between K1 and K2 shall be acceptable from the point of view of capital market experts in terms of experiencing that price.
. The time interval between the exercise of the selling option and the buying option shall be acceptable from the point of view of the capital market experts in terms of the possibility of not exercising the options.
. Dividends and voting rights belong to the investor (sale of shares) in the period of conceding shares (before exercising the selling and buying options) and in case of capital increase, the investor has the stock right to purchase it.

3- Sale Obligation
According to this contract, the obligor (lawyer) sells the owner's securities on behalf of him under the following conditions:

1- The obligor buys the sold securities for the owner until the specified maturity, whenever he wishes or during the obligation period whenever the owner demands.
2- The owner gives permission to the obligor to purchase the sold securities until the specified maturity date.
3- Until the return of the securities, the owner does not have the right to collect the money from the sale of the securities, but he has the right to invest the amount under special conditions and for his own benefit.
4- The obligor prepares and delivers the sold securities to the owner through using the money obtained from the sale of securities, and if the money is insufficient, the obligor compensates from his own property, and if the money is surplus, he takes it as attorney's fee.
5- According to the rules of the stock exchange, the obligor pays the initial fund as a guarantee and increases it whenever it is necessary.
6- The costs related to transactions shall be paid by the obligor.
7- In case of approval or distribution of profits for securities, the obligor shall pay the equivalent amount to the owner. This amount can be provided and paid through the obligor’s fund as a guarantee.

. In addition to shares, the asset of the sale obligation contract includes Islamic treasury bills, Musharakah, Ijarah and Murabaha bonds.