Options Trading for Beginners in Singapore: Complete 2025 Guide

Options trading can feel intimidating with its jargon and numbers. But once you break it down, even beginners in Singapore can learn how to trade options step by step. This guide explains what options are, how they work, main strategies, and the risks — so you’ll know whether stock options fit your investing goals.

Options trading involves buying or selling contracts called options. An option gives you the right — but not the obligation — to buy or sell an underlying asset at a predetermined price (the strike price) by a specific expiration date.

Example: You want to buy 100 shares of a stock at S$50 each. Instead of paying S$5,000 upfront, you could purchase an option contract that lets you buy those shares for S$60 within three months.

If the stock price rises to S$80, you can exercise the option, buy at S$60, and sell at S$80 — earning S$20 per share (minus the option cost and fees).

Options vs stocks: key differences

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Options trading offers leverage and flexibility, but it’s usually best for investors ready to monitor trades closely.

Before you dive into examples, here are some terms you’ll see again and again:

• Strike price: The agreed price to buy or sell the stock.

• Premium: The cost of buying the option.

• Expiration date: The deadline when the option contract ends.

• In the money (ITM): When exercising the option would be profitable.

• Out of the money (OTM): When exercising wouldn’t be profitable.

• At the money (ATM): When the stock price equals the strike price.

Getting started doesn’t have to be overwhelming. Here’s a step-by-step roadmap:

1. Create an options trading account

Most brokerages require a margin account, minimum funding, and a short knowledge check before approving options trading.

Try paper trading first — it’s simulated trading with no real money. This helps beginners practise strategies risk-free.

When choosing a broker, compare:

• Fees and commissions

• Platform usability

• Educational tools

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2. Pick which options to buy or sell

• Call option: Right to buy at strike price. Buy calls if you expect prices to rise.

• Put option: Right to sell at strike price. Buy puts if you expect prices to fall.

For beginners, stick with buying calls or puts before experimenting with advanced strategies.

3. Predict the strike price

The strike determines profitability.

• Bullish? Pick a strike above market price.

• Bearish? Pick a strike below market price.

Know the difference between:

• Intrinsic value: Profit if exercised immediately.

• Time value: Extra premium for future potential.

4. Set the timeframe

Options have expiry dates:

• Short-term (days/weeks): Riskier, but for quick market moves.

• Long-term (months/years): More expensive but allow more time for your thesis.

Pick an expiry that matches your confidence level and risk appetite.

Following these steps will make trading stock options for beginners less daunting.

Options fall into two categories:

• Call options: Right to buy an asset at a set price before expiry. Best for bullish views.

• Put options: Right to sell at a set price before expiry. Best for bearish views.

Think of a call option as a down payment on a future purchase, and a put option as insurance against price drops.

Call options 

A call option becomes more valuable as the underlying asset’s price rises. 

• Upside: Unlimited profit potential.

• Downside: Maximum loss = the premium you paid. 

Example:

You pay a S$20,000 deposit (premium) to buy a condo at S$400,000 in the next three years. If its market value rises to S$800,000, you still buy at S$400,000 — a huge gain. If approvals fall through and the contract expires, your loss is limited to the S$20,000 deposit.

Put options 

A put option becomes more valuable as the underlying asset’s price falls.

• Upside: Acts like insurance, limiting losses in downturns.

• Downside: Maximum loss = the premium you paid.

Example:

Like homeowner’s insurance, you pay a premium for protection. If the stock crashes, the put option lets you sell at the agreed strike price, cushioning your losses. If prices stay stable, you lose only the premium.

Uses of call and put options 

While calls and puts are the building blocks, there are many other trades worth knowing:

Buying calls (long calls)

• Best for: Bearish outlook or downside protection.

• Example: Buy put at S$50 strike. If stock falls to S$40, profit = S$10 per share minus premium.

• Risk/reward: Loss = premium only. Profit = unlimited upside.

Buying puts (long puts)

• Best for: Bearish outlook or downside protection.

• Example: Buy put at S$50 strike. If stock falls to S$40, profit = S$10 per share minus premium.

• Risk/reward: Loss = premium only. Profit capped by stock falling to zero.

Covered calls

• Best for: Flat/moderately bullish outlook.

• Example: Own 100 shares at S$50, sell call at S$55 for S$2 premium.

• Risk/reward: Premium provides income but upside is capped.

Protective put

Own stock + buy put.

• Example: Own 100 shares at S$50, buy put at S$45 for S$1. If stock falls to S$30, loss capped at S$600.

Protective collar

Own stock + buy put + sell call.

• Example: Own 100 shares at S$50, buy put at S$45, sell call at S$55. Losses capped, but so are gains.

Long straddles

Buy call + put at same strike/expiry.

• Best for: High volatility, unsure of direction.

• Risk/reward: Loss = total premium. Profit = large moves.

Long strangle

• Buy call above, put below market price.

• Cheaper than straddle but needs bigger move to profit.

Married put options

Buy stock + buy put.

• Best for: Long-term investors seeking protection.

• Risk/reward: Unlimited upside, downside capped by put strike.

Married put options strategy

• Example: Own 100 shares at S$75, buy S$70 put at S$2.

• If stock rises, enjoy gains (minus premium).

• If stock falls, max loss = difference + premium.

Protective collar strategy

A protective collar takes the married put one step further. 

Stock ownership + buy put + sell call.

• Best for: Investors who want low-cost downside protection and can accept capped upside.

• Risk/reward: Loss capped at put strike; gain capped at call strike.

Option prices depend on more than just the stock’s direction:

• Stock price: Movements above or below the strike price affect profitability.

• Market volatility: Higher volatility makes options more expensive.

• Time decay: The closer to expiration, the less time value the option has.

• Intrinsic vs. extrinsic value: The difference between the stock price and strike, plus the premium paid.

Anyone learning how to trade options needs to understand these factors before committing real money.

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When comparing stocks vs options trading for beginners, the key difference is ownership vs contracts.

Stocks

• Represent ownership in a company.

• You may receive dividends as a shareholder.

• No expiration — you can hold shares indefinitely.

• Best suited for long-term wealth building.

• Losses are limited to the share price going to zero.

Options

• Represent contracts, not ownership.

• Contracts come with expiry dates, ranging from days to months.

• Useful for short-term speculation, hedging risk, or generating income.

• Provide leverage, meaning you control more exposure with less capital.

• Carry higher risks, including losing the entire premium.

Is options trading better than investing in stocks?

There’s no universal answer. Both have advantages and disadvantages, and the right choice depends on your goals, time horizon, risk tolerance, and market knowledge.

• Stocks are better for long-term growth, dividends, and simpler wealth building.

• Options can provide leverage, income, or risk hedging, but they require more skill and active management.

Many investors use both together: stocks for steady growth, and options for hedging or income strategies.

Is options trading right for me?

To figure this out, you’ll need to assess:

• Your financial goals and risk tolerance.

• Your ability to commit time to learning and monitoring trades.

• Your discipline with money management.

If you’re new, consider starting with paper trading (simulated trading with no real money) to gain confidence before committing real capital. Options can be powerful tools — but they’re best approached with preparation and caution.

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Options can be powerful tools in your investing toolkit, but they require more knowledge, discipline, and risk management. Start with paper trades, keep positions small, and try beginner-friendly strategies before moving into advanced trades.