Bull Call Spread

A bull call spread costs less because you sell a higher strike call to offset part of the cost. The trade-off is that your profit is capped at the short strike. For example, buying a 3200 call might cost S$225, but a 3200/3250 bull call spread might only cost S$125. The spread has lower risk but also lower potential reward.

You can start with as little as S$5,000-10,000, though S$20,000+ is more comfortable. A typical STI bull call spread costs S$100-300 per contract. Following the 2% risk rule, you'd risk S$100-200 per trade on a S$10,000 account, allowing 1-2 contracts per trade.

At expiration: If STI is above your short strike, you achieve maximum profit (both options are exercised/assigned, you receive the spread width minus your cost). If STI is between strikes, your long call has value. If STI is below your long strike, both options expire worthless and you lose your premium. It's generally better to exit before expiration to avoid assignment complexity.

You can trade on both, but STI options have better liquidity. Individual stock options (DBS, OCBC, UOB) exist but have wider bid-ask spreads. For beginners, start with STI options. As you gain experience, you can trade stock options but be prepared for wider spreads and potentially higher slippage.

For exchange-traded options on SGX, you don't need a CDP account (options settle in cash, not shares). However, if you're trading CFDs through a broker, you also don't need CDP. CDP is only required if you want to own Singapore shares directly.

Narrower spreads (25-50 points) cost less but have lower max profit and need the stock to move less to hit max profit. Wider spreads (75-100+ points) cost more but have higher max profit potential. Choose width based on: (1) your target price, (2) risk tolerance, and (3) risk/reward ratio you're comfortable with. Generally, the short strike should be at or near your price target.

No. Adjust position size based on: (1) conviction level (higher conviction = more contracts), (2) max loss per contract (wider spreads = fewer contracts), (3) current portfolio exposure, and (4) volatility environment. In high volatility, use smaller sizes due to larger potential swings.

Roll when: your original thesis is still valid, you want to give it more time, and rolling cost is acceptable. Close when: thesis is invalidated, technical support is broken, better opportunities exist elsewhere, or max loss is approaching. Never roll just to avoid realizing a loss - that's how small losses become big losses.

Singapore markets are heavily influenced by China sentiment. Overnight China news (property sector, regulatory changes, trade tensions) can cause STI to gap significantly at open. To manage this: (1) use smaller position sizes, (2) don't hold maximum positions overnight, (3) monitor Hong Kong/China markets before Singapore opens, and (4) consider using longer DTE to survive gap moves.

Best liquidity is 9:30-11:30 AM SGT (after the opening auction settles) and 2:00-4:30 PM SGT (before the closing auction). Avoid 12:00-1:00 PM (lunch hour has low volume) and the first 30 minutes of trading (prices can be erratic). For spreads, afternoon sessions often have tighter markets after Hong Kong/China trading establishes direction.

Options: (1) Buy STI put options as portfolio hedge (expensive but defined risk), (2) Sell call spreads on uncorrelated assets to balance delta, (3) Use futures short to hedge delta exposure intraday, (4) Add bear put spreads on weak sectors to create long/short exposure. The key is to think in terms of portfolio delta and adjust based on market conditions rather than hedging each spread individually.

Backwardation (front-month IV > back-month IV) indicates fear and uncertainty. Adjustments: (1) Consider credit spreads instead of debit spreads, (2) Use longer-dated options where IV is relatively cheaper, (3) Reduce position sizes as gamma risk is elevated, (4) Consider calendar spreads to sell expensive front-month volatility. Avoid taking aggressive bullish positions when the market is pricing in fear.

Legging sequence: (1) Buy the long call first to establish directional exposure, (2) Wait for a small uptick in the underlying, (3) Sell the short call on that uptick. This way, if the market moves against you, you have directional exposure that benefits. The risk is that if the market drops after your long call purchase, you're stuck with a losing long call. Only leg when spread markets are more than 10% wide and you have high conviction on direction.

Look for: (1) Large call buying (blocks at ask) in your underlying, (2) Put/call ratio declining, (3) Unusual options activity at strikes near your target, (4) Institutions rolling up their call positions. SGX options flow data is less available than US markets, but you can monitor IBKR's options statistics or paid services. Confirm with technical analysis before entering based on flow alone.

DBS, OCBC, and UOB have 80%+ correlation. Bull call spreads on all three essentially triple your exposure to one bet. Better approach: (1) Trade only one bank at a time, (2) Use STI index options for bank sector exposure, (3) Pair long bank exposure with short exposure elsewhere (e.g., REITs if rates rising), (4) If trading multiple banks, treat them as one position for risk management. Diversification requires uncorrelated positions.