Futures/Derivatives Trading
Q1. What is Futures trading?
Q2. How do I find out about the trading hours of a particular contract?
Q3. How do I place my orders or trade?
Q4. What other support does Phillip Futures provide to clients who wish to trade Futures and Forex/Bullion?
Commodities Trading
Q1. What is commodities trading?
Q2. What are the commodity products offered by Phillip Futures?
Spot Forex Trading
Q1. What is Spot Forex trading?
Q2. What are the trading hours of the Spot Forex market?
Q3. Is there an expiry date for Spot Forex contract?
Q4. What is swap?
Q5. What is the standard contract size for trading Spot Forex?
Q6. What are the currencies offered by Phillip Futures?
Q7. Can I close out my Regular FX (100K) position with Mini FX (10K) position?
Q8. What are the spreads quoted by Phillip Futures?
Gold/Silver Trading
Q1. What are the different types of Gold/Silver trading available in Phillip Futures?
Q2. How is the interest on Gold/Silver contracts being calculated?
Q3. Under what circumstances do I incur interest or earn interest?
Futures Option Trading
Q1. For Options, buy call or buy put, do we need to pay margin?
Q2. Sell call or sell put, what is the margin requirement?
Q3. For Options, do we need to pay commission?
Q4. After the Option has expired, do we still need to pay commission?
Options
Q1: What are the uses of trading options?
Q2: Who are the users of options?
Q3: How do I use options to trade?
Q4: What are the advantages of trading options?
Q5: What are the advantages of writing options?
Q6: Why do option sellers make money almost ⅔ of the time?
Q7: What are the risks of buying options?
Q8: Is option an exchange traded product or an over-the-counter (OTC) product?
Q9: What are the types of options contracts traded on the Singapore Exchange (SGX)?
Q10: Do all futures contracts have options?
Q11: Do I need to pay margins when I trade options?
Q12: Why is margining needed?
Q13: Will the margin be different for customers who are buying or selling options?
Q14: When will I need to top-up my margin account?
Q15: I bought an index put option and just learnt that it has a “European” exercise style. Does this mean that I cannot close my position until expiration?
Q16: Why didn't my option move as much as the underlying (futures)?
Q17: If I exercise an in-the-money call option, how soon can I sell the underlying?
Q18: Is it true that most options expire worthless?
Q19: Who are market makers?
Q20: If I buy an option and forget to excise it at expiry, will I lose my investment?
Q21: Can I sell an option that I don’t own?
Q22: Can I cancel my option obligations?
Futures/Derivatives Trading
Q1. What is Futures trading?
A futures contract is an agreement to buy or sell a specified amount of a commodity at specified price on a specified future date. A commodity is either something physical like grains, livestocks, oil seeds, gold, crude oil etc. or something intangible like stock indices, currencies, and interest rates.
Join us at our seminars to find out more.
Q2. How do I find out about the trading hours of a particular contract?
Please refer to the contract specifications listed here or you can refer to the margin list under POEMS (log in to your own account) > Futures or Forex/ Gold > Attention.
Q3. How do I place my orders or trade?
You can choose to trade electronically via one of our electronic trading platforms or you may wish to call our 24-hour dealing desks to place your orders.
Click here for the different types of trading platforms offered by Phillip Futures.
Q4. What other support does Phillip Futures provide to clients to trade Futures and Forex/ Bullion?
Besides 24-hour support via our Dealing Desks and Technical Support Desk, we also provide regular market reports and other resources, free seminars and one-to-one coaching sessions as well as regular platform demo sessions.
Commodity Trading
Q1. What is commodities trading?
Commodities trading involves undertaking an agreement to buy or sell a set amount of a commodity at a predetermined price and date. Buyers use these to avoid the risks associated with the price fluctuations of the products or raw materials while sellers try to lock in a price for their products. More information can be found here.
Q2. What are the commodity products offered by Phillip Futures?
Phillip Futures offers commodity products in three main categories:
- Energy Futures contracts: Crude Oil, Brent Crude Mini Crude Oil, Natural Gas, Mini Natural Gas, Kerosene, Gasoline and Crude Palm Oil.
- Metal Futures contracts: Gold, Mini-sized Gold, Silver, Mini-sized Silver, Copper, Palladium, and Platinum.
- Agricultural Futures contracts: Corn, Soybeans, Soybean Oil, Soybean Meal, Oats, Wheat, Cotton, Orange Juice, Cocoa, Coffee, Sugar and Red Hard Winter Wheat.
Spot Forex Trading
Q1. What is Spot Forex trading?
The Foreign Exchange market, also referred to as the “Forex" or “FX" market is the largest financial market in the world with a daily average turnover of approximately US$2.6 trillion. Foreign Exchange is the simultaneous buying of one currency and selling of another. More information can be found here.
Q2. What are the trading hours of the Spot Forex market?
The Spot Forex market is different from any other financial markets as trading is available 24 hours a day. At Phillip Futures, we provide 24-hour dealing support. Our day order is defined as Singapore Time, 6am (Mon) - 5 am (Sat).
Q3. Is there an expiry date for Spot Forex contract?
A Spot Forex contract involves the trading of 2 currencies for settlement within 2 business days. However, if the client has an open position, Phillip Futures will do a strong rollover for clients automatically and there is no fee involved in the rollover process. Thus the client will not need to worry about monitoring the contracts expiry dates. Unlike Futures contracts or equities, clients with Spot Forex open positions can hold their positions for as long as they want, provided they have sufficient margins in their accounts to finance the position(s).
(Rollover is a process whereby the settlement of the contract is rolled forward or brought forward to the next value date).
Q4. What is swap?
In Forex trading, there is another element known as swap, or commonly known as the interest differential between 2 currencies.
Example:
If a client is buying a currency of higher interest rate than that of the one he is selling, he will gain swap points (or earn interest), and vice versa.
For more details of the swap points for each currency pair, please contact our Forex Desk at (65) 6536 7200 or Marketing Desk at (65) 6538 0500.
Q5. What is the standard contract size for trading Spot Forex?
The standard unit or regular size for Forex transaction at Phillip Futures is 100,000 of the base currency. This is applicable for most contracts except for some of the exotic crosses. New traders or those with lower risk appetites can also trade the smaller contract or Mini Forex of 10,000 (of the base currency).
Q6. What are the currencies offered by Phillip Futures?
Phillip Futures offers more than 30 currencies pairs for trading (including the G7 majors, crosses and other exotics currencies). The full list can be found here. We also offer some Asian currency contracts for trading such as USD/CNY, USD/MYR, etc. For more information, please call our Forex Desk at (65) 6536 7200.
| G7 MAJOR | CROSSES | EXOTICS AND OTHERS |
|---|---|---|
| EUR/USD | EUR/GBP | USD/SGD |
| USD/JPY | EUR/JPY | EUR/AUD |
| GBP/USD | EUR/CHF | AUD/NZD |
| USD/CHF | All JPY Crosses | and many more. |
| AUD/USD | All SGD Crosses | |
| NZD/USD | ||
| USD/CAD |
Q7. Can I close out my Regular FX (100K) position with Mini FX (10K) position?
No. 100K and 10K contracts are considered as different contracts.
Q8. What are the spreads quoted by Phillip Futures?
Competitive spreads from as low as 1 pip (subject to market conditions) onwards on major currency pairs, even on Mini Forex. Fractional pip quoting is available via Phillip FX 365 platform.
Gold/Silver Trading
Q1. What are the different types of Gold/Silver contracts available in Phillip Futures?
Phillip Futures has the following Gold/ Silver products for trading:
- Spot Loco London Gold/Silver
- Spot Mini-Gold and Mini-Silver
- Gold and Silver Futures and Options (COMEX, CBOT, TOCOM and HKFE)
Q2. How is the interest on Gold/Silver contracts being calculated?
Interest on the Spot Gold/ Silver contracts is calculated based on the prevailing interest rate of Spot Gold/ Silver in the market and the daily settlement price of your Spot Gold/Silver overnight position. The interest will be charged on a daily basis.
For more information, please call our Marketing Desk at (65) 6538 0500.
Q3. Under what circumstances do I incur interest or earned interest?
| A) Incur interest? | If you are long Gold (short USD) |
| B) Earn interest? | If you are short Gold (long USD) |
The scenarios above depend on the current Spot Gold interest rates.
Futures Options Trading
Q1. For Options, buy call or buy put, do we need to pay margin?
For the buyer of the Options, the buyer only pays the premium of the Options.
Q2. Sell call or sell put, what is the margin requirement?
As the seller of the Options, mostly a full margin equivalent to that of the underlying Futures contract is required for the margin. This is calculated and computed by the SGX SPAN system for Options margining.
Q3. For Options, do we need to pay commission?
Yes, it works the same way as trading the Futures contracts.
Q4. After the Option has expired, do we still need to pay commission?
No, because the Options?value depreciates with time and it becomes worthless when the Option has expired.
Options
Q1: What are the uses of trading options?
A: Trading options gives the buyer the right but not the obligation to either buy or sell a specific asset at a predetermined price on a future date. It differs from futures trading as, the options' purchaser has no obligation to either buy or sell for the exercise price and will do so only if it is profitable. Options are flexible instruments because they allow you to tailor the exact exposure and risk you wish to have for an anticipated move in the options price.
Q2: Who are the users of options?
A: Anybody, including speculators, arbitragers and hedgers, can be the users of options. Options not only allow people to take advantage of the price discrepancy, it also acts as a hedging tool.
Q3: How do I use options to trade?
A: To trade options, one can either buy or sell a call or a put option to open a position and execute an opposite trade to close out the position.
More information can be found here
Q4: What are the advantages of trading options?
A: There are many advantages of trading options. Options trading is flexible. It can be used in a wide variety of strategies, from conservative to high-risk, and can be tailored to more expectations than simply determine if the underlying is going up or going down. Trading options allows an investor to gain leverage in a contract without committing to a trade. Furthermore, risk is limited to the option premium for the buyer of an option. (Writers of options face unlimited downside risk.) In addition, trading options allows investors to protect their positions against adverse price fluctuations when it is not desirable to alter the underlying position.
Q5: What are the advantages of writing options?
A: Writing an option provides one with an additional source of income arising from the premium one receives from the buyer of the option. The premium also serves as a cushion against the risk exposure one would incur. For example, if you write a call option in anticipation of a decline in the price of an underlying, you will reduce your potential capital loss by the amount of premium you receive. However, if you expect the price of a particular underlying to rise, you may wish to write a put option and earn the premium as the put option holder will not exercise his right.
Q6: Why do option sellers make money almost ⅔ of the time?
A: An option seller is obligated to buy or sell the underlying on a specific date at a predetermined price, in exchange for a premium from the buyer of the option. Say for example, the buyer of a call option will only make money if the underlying price goes up. However, there is only a ⅓ change of the market going up or going down or remaining the same. Thus, a call option seller stands to gain when the market remains the same or if the market goes down, allowing them to keep the premium, making money almost ⅔ of the time.
Q7: What are the risks of buying options?
A: When you buy an option, you risk losing the premium in a relatively short time frame. The risk reflects the nature of an option as a wasting asset which becomes worthless when it reaches the expiration.
Q8: Is option an exchange traded product or an over-the-counter (OTC) product?
Options is both an exchange traded product and an OTC product.
Q9: What are the types of options contracts traded on the Singapore Exchange (SGX)?
Contracts traded on the Singapore Exchange Ltd (SGX) include the Eurodollar, Euroyen TIBOR, Euroyen LIBOR, 10-Year Japanese Government Bond, Mini 10-Year Japanese Government Bond, Nikkei 225 Index, Nikkei 300 Index and MSCI Taiwan Index. More information can be found on the SGX website.
Q10: Do all futures contracts have options?
No, not all futures contracts have options. The full list of options offered by Phillip Futures can be found here.
Q11: Do I need to pay margins when I trade options?
A: Yes, margins have to be paid.
Q12: Why is margining needed?
Margin is one of the major components of the financial safeguard system that protects the integrity of Singapore Exchange Derivatives Trading Limited (SGX-DT) futures and options markets. Margin requirements represent the good faith deposits put up by Clearing Members and their customers to guarantee the performance of the obligations associated with their futures or options on futures positions. Singapore Exchange Derivatives Clearing Limited (SGX-DC) determines minimum margin levels based on historical price change, volatilities and other factors that SGX-DC deems pertinent for all futures and options contracts.
Q13: Will the margin be different for customers who are buying or selling options?
Yes, the margin will be different for customers who are buying and selling options. Customers who are selling options will pay a higher margin due to a higher risk that will be undertaken. Currently, the initial margin used for selling option contracts in Phillip Futures is the same margin as that of the same underlying futures contract. Whereas for customers who are buying option contracts, the margin used will be derived from the premium paid multiplied by the contract size.
Q14: When will I need to top-up my margin account?
Initial margin are funds required to be placed by the customer with Phillip Futures at the initiation of the trade. Maintenance margin is the minimum required level of margin the customer must maintain in his account at all times in order to support the trade.
For example, if the initial margin is US$2,025 per contract for trading Corn Option with maintenance margin at US$1,800, the customer is required to deposit no less than US$2,025 in his account when he trades Corn Option. If the market go against the customer’s position and results in US$225 of unrealised loss.
This would then reduce his original margin to US$1,800, the minimum level acceptable. As long as this is maintained, there will be no further margin required from the customer.
After the initiation of a trade, the position will be marked based on daily settlement prices. As such, should the position continue to incur further unrealised losses, pushing the equity level below US$1,800, the customer will have to “top up” his margin back to the full US$2,025. This is called a margin call and the customer will have to pay the required amount promptly (within 2 days) or be forced to close his position.
Q15: I bought an index put option and just learnt that it has a “European” exercise style. Does this mean that I cannot close my position until expiration?
A: The exercise style of an option does not prevent an investor from closing the position by engaging in a closing transaction on an exchange up to and including the last trading day for the contract. A long (purchased) option contract can be closed by one of two methods: entering into a closing sale at an options exchange, or by exercising the contract. A European exercise style option can only be exercised at expiration so the only way to close your position prior to expiration is to execute a closing trade.
Index options can have different exercise styles and trading hours. Option holders would want to be certain that they know the difference between closing an open option position by exercising the contract, and closing the position via a trade on an exchange. Even the last trading day for expiring options can vary. The contract specifications of these index products contain important trading information regarding these options.
Q16: Why didn't my option move as much as the underlying (futures)?
A: Options will not move as much as their underlying unless they are in-the-money and/or very close to expiration. The amount an option can be expected to move given a 1-point move in the underlying futures contract is called delta. A delta of 0.5, for example, means that an option can be expected to move about fifty cents for every $1 move in the underlying contract. Delta will change with time to expiration as the option moves more in- or out-of-the-money, and will also be affected by the volatility of the underlying.
Q17: If I exercise an in-the-money call option, how soon can I sell the underlying?
A: As soon as you tell your broker you would like to exercise your right to buy the futures contract you are deemed to be a contract owner. Because of the irrevocable nature of the call exercise, you will be buying the futures contract at the strike price, and you can sell those contracts immediately after giving instructions to exercise.
Q18: Is it true that most options expire worthless?
A: No, this is not true. Approximately 55% of options are closed out before expiry, around 15% are exercised and around 30% expire worthless.
Q19: Who are market makers?
A: Market makers are simply professional traders who send in orders to buy and sell specific series of options. They are approved by the Exchange and must provide sufficient liquidity in such series.
Q20: If I buy an option and forget to excise it at expiry, will I lose my investment?
A: For options that expire on the same day as the underlying futures, at-the-money or out-of-the-money options are not allowed to be exercised on expiration day. There is no incentive for the long option holder to exercise such options since the options expire together with the underlying futures. Nevertheless, all in-the-money options will automatically be exercised on expiration day. For options that do not expire together with the underlying futures, request to exercise such options should they be at-the-money or out-of-the-money will be allowed.
Q21: Can I sell an option that I don’t own?
A: Yes. Options can be sold without you owning them but this is not known as short selling. When you buy an option, you pay out money to someone and obtain the right to buy (or sell, in the case of put options) the underlying at the strike price. The seller of the option sells you this right to buy (or sell) the underlying at the strike price and in return for a premium. The seller therefore takes money in, but also takes on the obligations that go along with the contract.
Q22: Can I cancel my option obligations?
A: Yes. You can cancel your obligation as a holder or writer of an option by effecting a closing transaction before the expiration date.
