How to Start Your Listed Options Trading Journey in Singapore?

Many people think that it is risky and complicated for options trading. However, options trading can be pretty simple once you know the basics. Options trading is becoming increasingly popular in Singapore as more investors seek to diversify their portfolios and generate income.

If you’re looking to start your journey into listed options trading in Singapore, here are a few things you need to know:

What are the listed options?

Listed options refer to the contracts that are traded on an exchange. These options give the holder the right, but not the obligation, to buy or sell an underlying asset at a price within a specific period.

How do listed options work?

When you trade listed options, you are betting on the underlying asset’s direction. If you assume the asset will go up, you will buy a call option. If you think the asset will go down, you will buy a put option.

What are some benefits of trading listed options?

Options offer flexibility and choices.

You can trade options with different strike prices and expiration dates. It allows you to tailor your options positions to suit your investment objectives.

Options provide leverage

You will only need to put up a small percentage of the underlying asset’s price as a margin when you trade options. You can control a prominent position with relatively small capital.

Options can help you hedge your portfolio.

By buying put options, you can protect your portfolio from downside risk.

Options can generate income.

If you correctly predict the underlying asset’s direction, you can make money from options trading through the premium you receive when you open your position.

Options trading is transparent.

Unlike some other investment vehicles, the options price is determined by supply and demand in the open market. It means you know exactly how much you are paying for your options position.

What are the risks of trading listed options?

Volatility risk

It is how much the price of an asset fluctuates. When volatility is high, the prices of assets move up and down rapidly, making it more difficult to predict which direction the price will move in.

Liquidity risk

It refers to the risk that there may not be enough buyers or sellers in the market to execute your trade at the desired price. It can cause you to either miss out on potential profits or incur losses.

Theta risk

Theta measures how much time value an option loses every day as it expires. When options are closer to expiration, they have less time value and are more sensitive to the underlying asset’s price changes. There is a greater chance of the option expiring worthless if the underlying asset doesn’t move in the desired direction.

Delta risk

Delta risk measures how much an option’s price will change for every one-point move in the underlying asset’s price. Options with a higher delta are more sensitive to the underlying asset’s price changes and carry more risk.

Gamma risk

Gamma measures how much an option’s delta will change for every one-point move in the underlying asset’s price. Options with a higher gamma are more sensitive to the underlying asset’s price changes and carry more risk.

How do I get started?

If you’re interested in starting your options trading journey in Singapore, the first step would be to find a good broker that offers options trading, like Saxo capital markets Pte. Once you have opened an account and been approved for options trading, you can start researching and placing trades.

Bottom line

Many people think that it is risky and complicated for options trading. However, options trading can be pretty simple once you know the basics. Options trading is becoming increasingly popular in Singapore as more investors seek to diversify their portfolios and generate income.