Bear Put Spread

A bear put spread costs less because you sell a lower strike put to offset part of the cost. The trade-off is that your profit is capped at the short strike. For example, buying a 3200 put might cost S$240, but a 3200/3150 bear put spread might only cost S$125. The spread has lower risk but also lower potential reward.

In some ways, yes. With a bear put spread, your risk is defined and limited to the premium paid. Shorting stocks or futures has unlimited loss potential if the market rises. However, bear put spreads require the move to happen within a timeframe (before expiration), while short positions don't have expiration.

If STI stays near your entry price, theta decay will slowly erode your spread's value. This is why bearish trades need the underlying to move - you're paying a premium for that downside exposure. If STI doesn't fall below your breakeven by expiration, you'll lose some or all of your premium.

Yes, but liquidity is lower than STI index options. DBS, OCBC, and UOB options exist but have wider bid-ask spreads. For beginners, start with STI options. Remember that all three banks are highly correlated, so bearish positions on all three is essentially one concentrated bet.

Use bear put spread (debit spread) when IV is low to moderate and you expect a move. Use bear call spread (credit spread) when IV is high - you collect premium and benefit if the market stays flat or falls. Bear put spreads profit from falling prices AND rising volatility.

Narrower spreads (25-50 points) cost less but have lower max profit and need smaller moves. Wider spreads (75-100+ points) cost more but have higher profit potential. Choose based on your target level for the underlying and desired risk/reward ratio.

Consider the 50% profit rule - take profits at 50% of max profit even if target isn't reached. Also consider time remaining. With 7-10 DTE, gamma risk increases significantly. A partial profit is better than holding for max profit and watching it reverse.

Singapore opens after China has been trading for 2+ hours. Negative China news (property, regulatory, economic) often causes STI to gap down at open. This can benefit your bear put spreads but may also cause wide spreads at open. If you're positioned bearish before China stress, you'll often see quick profits at Singapore open.

Roll when: you've captured 50-75% of profit but believe more downside remains, and rolling gives favorable risk/reward. Close when: target achieved, unsure of further downside, or capital is needed elsewhere. Rolling down extends your trade but adds complexity.

For better execution, enter during 9:30-11:30 AM SGT after the opening settles, or 2:00-4:30 PM. Avoid lunch hour (12-1 PM) when volume is low. If you're reacting to overnight news, wait 30-60 minutes after open for spreads to normalize.

Calculate your portfolio delta exposure and size hedges accordingly. Use STI options for broad exposure, or sector-specific options for targeted hedges. Consider rolling hedges monthly to maintain protection. The cost of continuous hedging (1-3% annually) should be viewed as insurance premium.

Steep put skew makes bear put spreads expensive. Alternatives: (1) Use bear call spreads (short premium benefits from high IV), (2) Use calendar put spreads (sell expensive front-month, buy cheaper back-month), (3) Wait for skew to normalize, (4) Accept the premium if conviction is very high.

During selloffs, correlations spike toward 1. All Singapore stocks tend to fall together. This means: (1) Diversification across Singapore stocks doesn't protect you, (2) STI puts provide broad hedge, (3) Bank put spreads hedge most of Singapore equity exposure due to banks' index weight, (4) Consider global diversification for true risk reduction.

For bearish positions: (1) Buy the long put first to establish downside exposure, (2) Wait for a small uptick in the underlying, (3) Sell the short put on that uptick. This way, if the market falls after your long put purchase, you profit. Risk is that market rises and you're stuck with an expensive long put.

MAS meetings are typically bi-annual. Before MAS: IV may be elevated, making debit spreads expensive. After MAS: direction is clearer. For bearish trades: tightening may initially hurt banks (higher funding costs) but help long-term (NIM). Wait for post-announcement clarity unless hedging specific event risk.