SGX DLCs rally, with TSYW and USJW soaring over 20% as Tesla and Alphabet hit record high.
Wall Street's benchmark S&P 500 index rose on Wednesday and a rally in tech stocks lifted the Nasdaq above the 20,000-point milestone for the first time, after a U.S. inflation report boosted expectations of a Federal Reserve interest rate cut.
Gain leveraged exposure to U.S. Magnificent Seven stocks during Asia hours with SGX-listed Daily Leverage Certificates (DLCs)
The U.S. Magnificent Seven, comprising top-performing technology giants, have been driving global market gains.
Timed with the 7th year anniversary of DLCs on SGX, SGX Securities is introducing U.S. stock underlyings for DLCs on 4 October 2024.
These new DLCs issued by Societe Generale offer three times long or short exposure with the first batch covering Apple, Nvidia and Tesla. The second batch, scheduled for listing on 8 October 2024 will expand the coverage to include Microsoft, Google parent Alphabet, Amazon.com and Meta Platforms.
SGX is the only venue in Asia to offer DLCs, with over S$21 billion traded since launch across three issuers. Today, there are nearly 400 outstanding DLCs linked to around 60 single stocks and equity indices across four markets.
Key Proposition of U.S. Stock DLCs
Short without margin: Take short positions easily without the hassle of margin requirements – useful for hedging against downturns.
Trade on market-moving events: Capitalise on earnings and other market-moving events during Asia hours.
Leveraged exposure: Gain leveraged access to U.S. stocks during Asia hours, trading conveniently in SGD or USD.
Short-term trader? Consider DLCs
DLCs designed to be traded on a short-term or intra-day basis.
The first batch of U.S. stock DLCs offers investors a fixed leverage of three times of the daily performance of the underlying stock.
How it works
Bullish? Choose a 3x Long DLC to gain 3% (before cost and fees) for every 1% rise in the underlying asset.
Bearish? Opt for a 3x Short DLC to gain 3% (before cost and fees) for every 1% fall in the underlying asset.
Visit www.sgx.com/dlc for more information.
Risk Note: Losses are amplified the same way. A 1% drop in the underlying asset means a 3% loss (before cost and fees) in a 3x Long DLC. Your entire invested capital is at risk, but the maximum total loss will not be more than the total invested capital.
Strategies for incorporating U.S. stock DLCs into trading portfolios
Intraday trading on market-moving events in Asia hours
News during Singapore hours may affect the derived spot price of U.S. stocks on alternative trading systems, which can influence DLC prices quoted by the Designated Market Maker (DMM).
For example, on 19 July 2024, a global IT outage triggered by a Crowdstrike update led to widespread disruptions in Microsoft-powered systems, affecting multiple industries. Microsoft shares dropped ~2% in U.S. premarket trading, while our Nasdaq 7x Short DLC (which has ~8% exposure to Microsoft in the index) surged by 5% at its intraday peak.
DLCs allow investors to trade on such events, offering leveraged exposure to capitalize on both bullish and bearish market movements.
Swing trading for short-term price movements
DLC intrinsic close tracks the daily close-to-close price change of underlying stock in U.S. time, which is usually 4pm Eastern Time for regular trading days.
Instead of staying up to trade U.S. stocks during U.S. hours, investors can initiate positions in anticipation of events such as earnings release or FOMC meetings, which may cause significant overnight moves. For instance, Nvidia shares fell ~6% on 28 August 2024 post-earnings, while the stock soared ~4% on 19 September 2024 after a U.S. Fed rate cut triggered a rally in semiconductor stocks. DLCs offer fixed leveraged exposure to the daily performance of the underlying stock e.g. a Nvidia 3x Long DLC could be up ~12% on 20 September 2024 morning before cost and fees.
