Directional - Bull Put (bullish) or Bear Call (bearish)
| Strategy Type | Vertical Credit Spread / Defined Risk Income |
| Market Outlook | Directional - Bull Put (bullish) or Bear Call (bearish) |
| Risk Profile | Defined Risk (Max loss = Width - Credit) |
| Reward Profile | Limited profit (Max profit = Credit received) |
| Time Horizon | Short to Medium-term (21-45 DTE typical) |
| Iv Environment | High IV preferred (more premium to collect) |
| Breakeven | Short strike ± Credit received |
| Primary Instruments | FTSE 100 Index options, UK large cap stock options, US-listed UK ADR options |
| Mas Compliance | MAS regulated brokers required; standard options approval sufficient |
| Trading Hours | FTSE options: London hours 4 PM - 12:30 AM SGT; US ADRs: US hours |
| Contract Size | FTSE 100 options: £10 per point; Stock options: 100 shares typically |
| Settlement | FTSE options: Cash settled; Stock options: Physical delivery |
| Tax Treatment | No capital gains tax for individuals in Singapore |
| Margin Requirements | Defined risk - margin = max loss (width - credit) |
| Cdp Account | Not required for foreign options; custody with broker |
| Singapore Relevance | Credit spreads provide consistent income generation with defined risk, ideal for systematic approach favored by Singapore traders |
Sell one option, buy another at different strike for net credit. Bull put spread (bullish) or bear call spread (bearish). Defined risk - max loss is width minus credit. Income generation strategy.
Bull put: Bullish/neutral view, use at support levels. Bear call: Bearish/neutral view, use at resistance levels. Bull put often has more credit due to put skew.
Max loss = Spread width - Credit received. For 50-point width with £8 credit: Max loss = £50 - £8 = £42. Occurs if price moves through both strikes.
50% of credit is standard. Close when position worth half the credit received. Example: £8 credit, close at £4 value. Captures bulk of profit, reduces gamma risk.
High IV (rank > 30%). Higher IV = More premium to collect. Also benefit from IV crush if IV declines. Avoid low IV - credits too small for risk.
Combined approach: Technical level (support/resistance) + Delta verification (10-25 range). Place short strike at/beyond technical level. Verify delta is acceptable. Width based on conviction.
When short strike delta > 0.30 or strike breached. Only if > 14 DTE. Options: Roll same expiration, roll out in time, close and reopen. Only adjust if cost-effective.
Faster theta but higher gamma risk. Use 12-14 delta (wider), 25% profit target (quicker), close by Thursday. Smaller position size. Master monthlies first.
Put skew makes OTM puts expensive. Bull put spreads generate more credit at same delta. Consider this when choosing spread type. Bull put often preferred for income.
Target > 30% of spread width. For 50-point width, need > £15 credit. Below 30% means risk-reward unfavorable. Wait for higher IV or adjust strikes.
Analyze skew at potential short strikes. Higher IV at short = More credit. Lower IV at long = Cheaper protection. Compare across strikes and widths. Enter when surface offers edge.
Multiple uncorrelated underlyings, balance bull/bear directions, stagger expirations (laddering). 2-3% per position, 20-30% total. Track aggregate Greeks. Rebalance regularly.
Rolling window optimization - train on period 1, test on period 2, roll forward. Prevents overfitting. Use for delta selection, width optimization, DTE timing. More robust than static backtest.
Sum all position deltas. Target near-zero for neutral. Add opposing spreads to balance. Bull put = Positive delta, Bear call = Negative delta. Weekly rebalancing.
Position Size = Portfolio Risk % / Max Loss per Spread. Example: S$50K × 2% = S$1,000 risk. Max loss S$420. Size = 2 contracts. Consistent risk per trade, portfolio survival.
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