Futures are legal agreements to buy or sell an asset on a specific future date at an agreed price. Professional investors trade them in several markets worldwide, including in Singapore. Their high liquidity and relative ease of use make them ideal instruments for traders looking for quick, precise returns.
Choosing which futures to trade in Singapore can be challenging for new traders. There are some basic guidelines that may help you decide what type of instrument best fits your risk profile and trading style. This guide will look at the types of futures contracts in Singapore.
Index futures
These are used to bet on the performance of a specific index, such as the Straits Times Index or S&P 500. For example, an investor who believes that the STI will perform well would buy a ‘long’ position in Singapore Oil – STI Weekly Futures. Conversely, an investor who thinks STI will do poorly would go short by buying a ‘short’ position in the same product.
Commodity futures
Commodities can be traded at fixed prices for future delivery anywhere between one day and several years from now. These include oil, gold and soybeans, among many others. These commodities tend to be less popular due to their more complex nature, but they offer potentially higher returns for investors with sufficient knowledge.
Stock derivatives
These contracts give the owner the right to buy or sell a stock at an agreed price. These include options and warrants, which allow you to buy or sell stocks at a fixed price for a certain period. More experienced traders typically use them as they require good market timing skills and large amounts of capital to be profitable. They can also be difficult to exit if you need your money quickly due to the market’s limited number of buyers and sellers.
E-mini S&P 500 futures
An e-minis contract is valued at 50 times the standard S&P 500 futures value, making them a popular choice for small traders. They are traded on the CME but have been linked to the Singapore market through SGX-DT, which allows you to view their prices in SGD while trading from within the country.
Forex futures
Also called ‘no frills’ or ‘mini’ contracts, these allow investors to bet on the volatility of different currencies against each other without requiring large amounts of capital for entry and exit positions. For example, buying a long position in EUR/USD means betting that the Euro will strengthen against the USD. As no physical settlement is involved, forex futures do not require collateral and can be easily bought by retail investors with access to direct market access (DMA) accounts.
Forex futures prices are usually quoted in relation to the US dollar, so buying a ‘long’ position means betting that the currency will rise in value. For example, buying EUR/USD at 1.25 predicts that one Euro will be worth $1.25 in the future.
Singapore Oil – STI Weekly Futures
This is a popular product among traders who believe that Singapore’s economy will grow steadily. As commodities tend to require more knowledge and experience than indices, these oil futures offer leverage equal only to one times the value of the underlying stock as opposed to 20x available for S&P 500 futures, making them accessible even for beginners.
However, this also limits the investor’s potential returns. For example, buying a long contract in Singapore Oil at $40 would require $40 to gain one dollar versus less than $4 for S&P futures that typically have lower spreads.
Summary
Beginner traders interested in .futures trading singapore are advised to use an online broker with a good reputation and trade on a demo account before investing real money. Saxo Bank offers the lowest commission and excellent customer service.
