Trading options is something that many traders aspire to do because of the high potential returns. However, not everyone has access to the resources needed to get started. This article will guide Singaporean traders looking to develop their options trading skills.
Steps to develop your options trading skills
One needs to go through many steps to develop their options trading skills successfully.
Take an online course.
The first step I would suggest is taking an online course. Various websites offer classes on different topics, including options trading courses. Some of these courses can be free, while others will require payment. It’s best to choose a site with good reviews and one endorsed by well-known industry players such as bloggers or financial advisors. You may also want to see if the site is linked to any financial institutions. Furthermore, it’s worthwhile seeing if the course is endorsed by a financial regulator such as MAS or SEC.
Trade with an online broker
A second way to develop your trading skills is by trading with an online broker. A good place for beginner traders to start is brokers offering virtual practice accounts without requiring too much information, like Saxo Bank. They will also allow you to get some essential experience in placing orders and executing strategies before starting an account with a real money brokerage: for more information, check over here.
Another way you can improve your options trading skills is by attending seminars organized by companies or experts in this field. Several companies regularly offer seminars on options trading, such as the Options Industry Council. It’s worth taking advantage of these available seminars in your region.
Get real-world trading experience.
The last way to develop your options trading skills is through real-world practice. This means you should try to find someone who would be willing to trade with you or even open up an account for you so that you can change their money under their guidance. This may be difficult for many people, but it’s achievable if you ask around and connect with the industry. If not, finding a friend or family member who would be open to letting you use their trading account could work well for both parties involved in the arrangement.
Set your goals
One final note about developing your options trading skills is that you should always set a goal when entering the market. This could be anything from trading for a living to simply trading in your spare time, but without a specific goal in mind, it’s hard to maintain motivation and sustain effort in learning how to sell well.
Risks associated with options trading in Singapore
The first significant downside to options trading is time decay. Like how things wear out over time due to friction and aging, the same thing happens to options. Every day that passes, the value of options drops by a small amount due to time decay, even if there are no other changes in price movement or volatility.
Another downside is the leverage factor, which allows it to control significant amounts with small amounts initially set aside for trading. For example, you can buy or sell an option contract only using 10% of your usual portfolio size because the actual underlying asset does not have to be bought or sold directly. The problem here is that leveraging magnifies both profits and losses as it multiplies the risk up to about 500 times what you invested.
It’s recommended that traders should use stop-loss orders as much as possible if they’re practicing options trading as a way of protecting their investments. Using an experienced and reputable online broker like Saxo Bank is also recommended.