Best Options Trading Platforms in Singapore

Options trading is rightly seen as potentially involving a scaling up of risk-return, but the derivative instruments were initially developed to mitigate risk. Singapore traders who brush up on how they work can pick how to fit them into their investment strategies. The good news is that several reputable brokers have upgraded their offering of options markets to include options trading of indices, single-stocks, forex, bonds and commodities. When handled with care, they can be part of a portfolio's income stream.

The 4 Best Options Trading Platforms in Singapore

1. IG
2. Saxo
3. Plus500 (CFD provider)
4. AvaTrade

#1IG

#2Saxo Markets

#3Plus500 (CFD provider)

#4AvaTrade

Why Do Options Platforms Apply to be Regulated?

Options markets fly under the radar of some traders and investors. The perception is that they are too risky. While that can be the case, it's more down to how people treat them than inherent risks. If buying options, the maximum loss on the trade will be the premium paid when the position opened.

Trading options in their own right is one way to increase leverage terms effectively. The brokers listed above provide educational and research materials to help their clients understand the different strategies and risks involved. Using options to hedge positions in the underlying asset, such as an equity or index, is in line with how the options markets came about to help traders scale back on risk return.

The market risk associated with options trading needs to be considered alongside the operational risk of trading them. You are exposed to price moves in an underlying market if you buy an option, but you don't own the actual underlying. That means your broker must be in good enough health to be around to pay out if your strategy is a winning one. Also, factor in that some option strategies can take 12 months to come good. It's no surprise then that those looking to trade options have tended to head to platforms of established brokers such as IG, AvaTrade and Saxo.

The shortlisted firms able to put their names forward for the title of the Best Options Platform in Singapore have all set about doing the right thing in terms of regulatory approval. All are regulated by at least one Tier-1 authority, which means high protection levels for account holders. No one will offer guarantees that your investment will go up in value – that's not how the markets work. But the listed advisors have set themselves up to be considered safe by MAS, FCA, CySEC or ASIC.

Customer protection features vary from regulator to regulator, and it's recommended some of the below features should be provided by platforms that make your shortlist.

• Complaints Procedures – Being licensed requires brokers to have formal complaints procedures, and if the broker can't resolve an issue, it's possible to escalate it with the regulator.
• Cash deposit protection schemes
• Negative Balance Protection – not being able to lose more than your initial stake
• Segregation of client funds – if the broker goes bust, your money is safe as it's held in an independent account
• Risk warnings – brokers are required to offer information on the risks associated with trading
• Order Execution Policies – in place to ensure fair pricing and manage any potential conflicts of interest
• Anti-money laundering rules – these are designed to enable authorities to clamp down on organised criminals and terrorists and help keep control of the payment system

The process of gaining regulatory approval takes time and money. Once licensed, firms then have to continue to demonstrate they are operating in line with the terms and conditions of their licence, and the reporting required is another expense. Any transgressions can leave the firm open to warnings, fines, and reputational risk, which all adds up to the end-user being able to take some confidence that a platform is being well-regulated. Any firm willing to become regulated will not only be open to higher levels of scrutiny but will also have a well thought out business plan designed to make the most out of it being seen as legitimate.

Final Thoughts

Those new to options trading will find they are stepping into something of a different world but in a good way. The functionality of options allows traders to gain exposure to a range of underlying asset markets but with a subtle twist. Signing up with a good broker, one that translates some of the jargon into easy-to-understand terms, will find they break through some of the mystery of the markets. Once that is achieved, the usefulness of options becomes apparent. Whether you trade options outright or as part of a diversified portfolio, the options market can offer flexibility and functionality not found in other asset groups. That is undoubtedly part of the reason for their increasing popularity.

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