A good options broker will make all the difference to your trading experience on the stock market in Singapore. Furthermore, unlike many other forms of trading, options are not only about making money. They also allow you to generate income from investments that would have otherwise remained dormant.
The first thing that you need to answer here is your needs? Each broker will be able to offer different services at different costs. Some brokers specialize in specific fields more than others do. Before choosing a broker, be sure to research their certifications and qualifications. You may also want to check with the Monetary Authority of Singapore regarding whether or not they hold any licenses for financial advisory services that fall under MAS’ guidelines.
Below are some considerations for deciding on a good options broker:
Regulation
The first point under this category is whether or not the market being traded is regulated or unregulated by the SFC (Securities and Futures Commission). Regulated markets tend to be quite strict about how and by whom they can be traded, and this is to help protect investors.
Commissions
As with any other form of trading, commissions play a significant role in determining the overall profitability of your trades. The commission charged will depend significantly on the type of instrument you intend to trade and the broker’s policy. Brokers typically charge either a fixed or percentage commission (per contract). Almost all brokers offer discounts for a higher number of contracts traded.
Trading Platform
This is one of the most important factors to many traders because it determines how difficult and time-consuming it is to make trades. There are several different types of trading platforms, and each works quite differently from another, so choosing between them can be daunting at first.
Expiry Times
The longer the expiry time, the higher the premium charged. Other than buying calls or putting at the money (or strike price), there are also ‘out of the money options with no intrinsic value but can be used as insurance.
Contract Types
Some brokers offer more types than others, so you should always look for one that provides everything that would suit your needs.
Minimum Contract Size
The minimum amount that each contract will cost you. For instance, if it’s 1 cent, regardless of how much any stock might be worth in terms of dollars, you would still need to buy at least 100 shares. Having a smaller minimum contract size allows for flexibility when starting.
Contract Expiration
When the contract expires, it either becomes worthless or is worth some value, depending on how accurately you predicted the stock price at expiry. There are also monthly contracts that expire every month and must be renewed.
Risk Management
Good brokers will assist you in managing your risks and help minimize any losses that may result from a bad trade. This can include stopping losses and take-profit orders so that your transactions do not go past a certain point of failure.
Regulated vs. Unregulated markets
It should be noted that any trading in the unregulated market means the broker is not subject to regulation under Singapore law, whereas regulated brokers are. However, there is a greater chance of companies defrauding their customers, but it shouldn’t be an issue if you trust your broker.
Bottom Line
These are just some considerations for choosing an options broker in Singapore. Before using one broker over another, you should consider all aspects because each has its unique advantages and disadvantages. Options are unique in that they can be used for more than just making money. They also allow traders to generate income from their existing investments, which would otherwise remain dormant. We recommend using an experienced and reputable online broker from Saxo Bank and trading on a demo account before investing your money. For more information, read more here.
