Regarding futures trading, Singapore is a hub for activity in Southeast Asia. Several different exchanges and clearinghouses offer a variety of futures contracts. Traders must ensure they choose a suitable contract for their needs, and there are a few critical factors to consider when deciding. Those interested can try futures trading through Saxo Bank.

The Underlying Asset

The first factor to consider is the underlying asset of the contract. What is being traded? It may seem obvious, but it is essential to consider what you are buying or selling. For example, if you want to trade oil futures, you need to ensure the contract you choose is for the correct oil. There are many different types of oil, and each one trades differently.

The Delivery Method

The second factor to consider is the delivery method. Futures contracts can be either cash-settled or physically delivered. With a cash-settled contract, no actual commodity exchange occurs. The buyer and seller agree to settle their positions at the end of the contract period. A physically delivered contract exchanges the commodity between the buyer and seller.

The Contract Size

The third factor to consider is the contract size, which refers to the amount of the underlying commodity traded per contract. For example, a standard oil futures contract is for 1,000 barrels. That means that each contract represents 1,000 barrels of oil.

The Pricing Method

The fourth factor to consider is the pricing method. Futures contracts can be either priced in U.S. dollars or local currency. If you are trading a U.S.-based futures contract, it will be priced in U.S. dollars. If you are trading a contract from another country, it will be priced in that country’s currency.

The Expiration Date

The last factor to consider is the expiration date, the date on which the contract expires and must be settled. For most futures contracts, this is the third Friday of the month. However, some contracts have different expiration dates. Make sure you know when the contract you are trading expires.

How to trade futures in Singapore

Determine your goals

The first thing you’ll need to do is determine your investment goals. Are you looking to speculate on the price of the underlying commodity? Or are you looking to hedge against a potential price movement? Your investment goals will affect the contract you trade.

Choose an exchange

The next step is to choose an exchange. Several exchanges and clearinghouses offer futures contracts in Singapore. The Singapore Exchange (SGX) and the Chicago Mercantile Exchange (CME) are the most popular exchanges. You may need to use a different exchange if you are trading a contract from another country. Make sure you check the requirements of the exchange before trading.

Choose a broker

The third step is to choose a broker. Many brokers offer futures trading in Singapore. Make sure you compare the fees and services of each broker before choosing one.

Open an account

The fourth step is to open an account with your chosen broker. You will need to provide some personal information and fund your account before you can start trading.

Choose a contract

The last step is to choose a contract. Make sure you consider the factors discussed above when choosing a contract. Once you have chosen a contract, you can start trading.

Benefits of trading futures

Leverage

One of the main benefits of futures trading is leverage. Leverage allows you to trade a more prominent position than you would otherwise be able to trade. For example, if you have $10,000 in your account, you can trade up to $100,000 worth of contracts. It allows you to make more profits (or losses) than you would with a minor position.

Low costs

Another benefit of futures trading is low costs. Futures contracts are traded on margin, which means you only need to put down a small amount of money to open a position. It allows you to trade with lower capital than you would need to trade in other markets.

Access to global markets

Futures trading also gives you access to global markets. You can trade contracts worldwide on Singapore exchanges, allowing you to take advantage of price movements in different markets.