Index Iron Condor

Index options offer built-in diversification (30 stocks), cash settlement (no assignment), and exposure to the broad market. They're ideal if you have a view on the overall Singapore market rather than a specific company.

Cash settlement means no stocks change hands at expiration. If options are ITM, you receive (or pay) the cash difference between strike and settlement price. This eliminates the complexity of managing stock positions from assignment.

Multiply points by S$5 (the multiplier). If you collect 15 points credit, that's 15 × S$5 = S$75 per contract. If your max loss is 35 points, that's 35 × S$5 = S$175 per contract.

STI options are less liquid than US index options but tradeable for retail sizes. Expect 2-5 point bid-ask spreads. Use limit orders, prefer round number strikes, and be patient. For larger positions, liquidity may be a constraint.

No. STI options are European style, meaning exercise is only possible at expiration. There is no early assignment risk, unlike American-style equity options.

The STI is heavily weighted toward financial stocks (banks ~40%). When banks move together, the STI follows. A banking sector event (like MAS policy) can significantly move the index even if other sectors are stable.

Index put skew means puts are relatively expensive. You may favor slightly asymmetric ICs (larger put spreads) to capture this premium. However, this also means more downside risk, so balance accordingly.

Close or reduce position before major events, widen strikes if holding through, or simply avoid having ICs over event dates. Post-event, wait for volatility to settle before entering new positions.

Index ICs provide broad market exposure in a single trade. They can serve as income generators or partial hedges for equity portfolios. Managing one index position is simpler than multiple equity positions.

On expiration day, the settlement value is calculated from component stocks' opening prices. Your position is marked against this value. ITM options are automatically exercised (cash settlement). OTM options expire worthless.

In contango (normal), back month IV is higher. When rolling, you sell richer back month options. In backwardation, front month is richer - may favor not rolling or rolling earlier. Analyze term structure before roll decisions.

Yes. Pair index ICs with stock-specific positions. Example: Long undervalued Singapore stock + Short STI IC. The IC profits if the market is flat while your stock outperforms. This captures alpha while hedging beta.

Define regime rules: In sideways markets, use standard approach. In trending markets, skip or reduce size. In high-vol regimes, widen wings. Back-test these rules against historical STI data to validate.

Settlement is based on opening prices, which can gap from previous close. Overnight global events can significantly move the settlement value. Consider closing 1-2 days before expiration to avoid this uncertainty, unless position is clearly OTM.

Allocate 15-30% of options capital to index ICs as a core income strategy. Complement with equity ICs (stock-specific views), directional trades (when conviction exists), and hedges (during uncertainty). Rebalance based on performance and market conditions.