Martin Lee @ Sg
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Listed Stock Options in Singapore

I am sure many of us have heard about options trading.

Most of the time, the strategies have to be implemented using stock options listed in the US market.

In the near future, we might be able to trade stock options linked to our own Singapore listed stocks.

SGX is currently exploring plans to make sure options available in the next two years.

SGX eyes single-stock options within 2 years (Business Times)

While having stock options will allow us to implement more investment strategies, it remains to be seen whether the instrument will have sufficient liquidity and volume. If this project is successful, it could also mean the end of the numerous warrants issued by third parties that we see currently.

One significant difference is that anyone could become a market marker, as you would be able to buy or even sell options that you don’t own. Selling naked options can be dangerous though, and the regulators will probably have very strict rules on this.

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1 comment
James says 6 years ago

SGX can easily overcome the danger of naked options selling with following rules:

1) Trader must have min. $25K in a/c.
2) Once holding a naked sell option & market against him/her up to 90% of his cash a/c, his/her trade will automatically be closed out. For any subsequent new trade, he/she will again top up his/her a/c with $25K.

Of course the initial trade of such naked sell options can only use max 50% of the cash a/c. So, all sides are well covered.

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