June 30, 2007

Options Trading - In Singapore?

There are a few people actually asked me about trading options in Singapore.

I find it difficult to answer them because I am not sure what exactly they are asking as they just drop me an email or private message me in a forum. Do they mean that they want to trade options listed in Singapore? Or do they mean that they want to trade in Singapore those options listed overseas?

Therefore, I try to answer their questions by using a Q&A format, and hope that they can find my answers useful.

1) What are the Singapore listed options we can trade in Singapore?

Ans : While Singapore claim to be an international fiancial centre, I still find that its financial market lacks width and dept. In the Singapore Exchange, there isn't any listed options available for trading. The nearest is warrants issued by various banks on selected stocks and index. This is not as good as listed options because you can only buy the warrants but not short the warrant. The other alternative is to trade listed options on futures for Nikkei 225 futures, or the MSCI Taiwan index futures. The liquidity is not great and the margin requirement for Nikkei 225 is quite high as well. Therefore, to me, option listed in Singapore are not very tradable.

However, if you still would like to trade Singapore listed option, you may approach brokerage houses like Phillibs Futures, CIMB-GK Goh Futures or other brokerage houses to open a futures trading account. You are required to put a minimum sum as deposit (for margin purpose) before you can start trading.

2) How can one trade US options out of Singapore?

Ans : You can open a trading account with US brokers like interactive brokers or optionsxpress. These are internet brokers whereby you can trade through them as long as you have internet connection.

3) Is there any different between those option listed in Singapore and those listed in US?

Ans : Option is basically a derivative base on an underlying instrument. Therefore, there is no difference. However, the market in US is wider and deeper, and therefore there are alot of liquidity. Morever, listed options are available in US stocks, and therefore it means a wide selection of trading choices for the traders.

The basics of option is the same regardless where it is listed. An option is an option, period. A call option is a call option, whether you are talking about those listed in Singapore or US.

4) Are they any useful site I can go to if I want to learn more about option?

Ans : There are many options website available. One website that I think will be useful for new comers is www.schaeffersresearch.com. It gives out free education materials.

5) I saw many advertisments on Options trading courses, are they any good?

Ans : This is a difficult question to answer as it will depends on indiviuals. However, do be careful with some of the claims. They may advertise that their students make 100%, or even 1000% return trading options. While it may be true, but it may not be the whole truth. The students may make those return in one out of ten trades, with the other 9 trades being loser.


Anonymous said...

I also learn a lot about options trading from http://www.optiontradingpedia.com . It is much easier to understand for beginners and have lots of examples.

Anonymous said...

I agreed with your point on the Q&A-5 regarding those Options trading courses offer here. These Gurus who make claim how their student make profit in just one trade in a day or two, or even during the course are just selling "HOPE" to people with a very high price tag. Offen you see them repeat the same old advertisement and claim again and again for years. Market is very dynamic, what works in the pass may not work now. These courses usally come with hidden cost that you may need to pay later, such as paying high membership fee to get update on changes on trading methods (which in a sense show that methods you learn in the course may be outdated soon). Some require to pay a fee for trading software and data. In fact, with the information so easily available on the internet, one can easily find many free education material on trading such as Forex, Stocks or Options. You need to do your own research and study. Open a free online Virtual trading account (paper money) with any online Brokers that offer the service so you can try out you own trading method in your free time without putting real money on the line.