To The Moon

Speaker: Benedict Lim, U.S. options trainer and host of one of Singapore's largest retail investor meetup groups, as he introduces strategies for when you are not sure which way a stock will go, and warns about the costs of getting it wrong.

[About the Speaker] Benedict Lim is the host of one of the largest retail investor meetup groups in Singapore, and a stock market trainer on U.S. options with over 15 years of experience in the stock markets. He is also a veteran of the banking industry, having worked at top global banks including Standard Chartered, DBS and HSBC, with over a decade as a financial analyst, business analyst and wealth manager.

[The Hook] Benedict's logic was simple: sometimes you do not know the direction. Rather than guess, you can set up a position that benefits if the price moves enough either way. Then he spent as much time on what can go wrong as on how it works.

[The Straddle]

A straddle means buying a call and a put at the same strike price and the same expiry, with the strike close to the current share price. In the house example, you buy both the right to buy and the right to sell at S$1 million.

• If the price swings far enough in either direction, one side can pay off.

• Because you buy two premiums, the move must be large enough to cover both costs first.

• If the stock does not move, you do not make money, and you can lose the whole amount paid.

He stressed that timing matters: both options are bought at the same time, and time decay works against you on both.

[The Strangle]

A strangle is the same idea with different strikes: for example, a call above the current price and a put below it. It is cheaper than a straddle, but the stock must move even further before it pays. In response to a question from the audience, Benedict described the straddle as the simpler one for beginners. He also mentioned spreads as the next step, which he planned to cover in the demo.

[Two Risks to Respect]

• Time decay. Options lose value daily, and the loss speeds up near expiry. Even with a good view on the price, you may not get the full profit if the move comes too late, and you can lose 100% of the capital if nothing happens.

• Volatility crush. Implied volatility can fall sharply, usually after an expected event passes. When it does, option prices can shrink even if the stock moves, because part of what you paid was for uncertainty.

[Trading Is Not Gambling]

Benedict closed this section with a distinction. Trading needs an edge, which you apply repeatedly with proper size and risk management so that the edge plays out over many trades. He compared it with a casino, which does not win every hand but has an edge and plays it many times. Without an edge and disciplined sizing, it becomes gambling.

[Key Takeaways]

• Straddle = call + put, same strike. It needs a big move to cover two premiums.

• Strangle is cheaper but needs an even bigger move.

• Time decay and volatility crush can hurt even when you are right on direction.

• An edge and sensible position size separate trading from gambling.

[Call to Action 🎯]

1. Practise on the Tiger virtual platform. Set up a straddle and a strangle on the same stock and compare their cost.

2. Work out how far the price must move for each to break even.

3. Drop a comment: what is one situation where you would not know the direction, and what would you do?

Markets are always moving - and sometimes, the best move is knowing what works for you.

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