• Tesla Daily Leveraged Certificate (DLCs) have been the most traded among the US Stock DLCs since their launch on SGX last October.  They  accounted for S$6.5 million turnover since launch, around 57% of the overall US Stock DLCs turnover. As of 14 January, the total open interest in Tesla DLCs is approximately $0.4 million. The long/short ratio is 4:1 both by open interest and trading turnover.
   
• The popularity of the Tesla DLCs comes amid volatile trading for the underlying Tesla stock since October, with various events driving strong price swings. Such events – including news release during Asia hours, the Tesla Robotaxi unveiling announcement, third-quarter earnings release and the US elections results – provide DLC investors with opportunities for short-term trading. Upcoming events include Trump’s inauguration and fourth-quarter earnings.
   
• With the momentum post-US elections, investors could also hold the DLCs over a longer period to ride on positive market sentiment, with the DLCs providing 3x leverage return compounded over the period. 
   
• New USD-denominated counters are available for trading. The short counter TSUW currently trades above US$3 and is more price-sensitive than its SGD counterpart TSXW, which is trading below S$0.50. The long counter TSTW is also more affordable than its SGD counterpart TSYW, requiring a minimum investment of around US$860 (~S$1.2k) compared to S$1.4k for TSYW. 
   

Tesla stock recorded an all-time high closing price of US$479.86 in the US on 17 December. In Singapore, US Stock DLCs also saw activity spike, with S$426k in turnover on 18 December, the highest in a month, with Tesla contributing 92% of this turnover. 

Similarly, the week of 16-20 December recorded a turnover of S$1.3M, the highest weekly turnover since launch. Since the launch of US Stock DLCs on 4 October, Tesla’s share price almost doubled as of 17 December, driven by the post-election momentum. The 3x Long DLC (TSYW) surged 455% from an issue price of $5 to a record high intrinsic close price of $27.738 on 17 December, while the 3x Short DLC (TSXW) dropped approximately 95% over the same period. The maximum downside risk is limited to the total loss of the initial investment, while the high leverage offers investors the opportunity to amplify short-term returns. 

Understanding US DLCs: How They Work Across Time Zones

Note: All examples are before costs and fees and not indicative of future performance.

• US Stock DLCs provide fixed leverage on the daily performance of US stocks, based on a US market close-to-close basis.
• The daily leverage is based on the previous US market close at 4:00 PM ET.
• During SGX market hours, these DLCs track the derived spot price of US stocks on alternative trading systems. Investors may check out the issuer’s DLC website for derived spot prices (up to 15 minutes delay) during Asia hours.
• Example: If a 3x Long DLC is $1 when the stock is $100 at the US market close on day T:
  • On T+1, if the stock rises 6% during US after-hours trading to $106 when SGX market opens, the 3x Long DLC gains 18% to $1.18.
  • By SGX market close, if the stock rises to $110 (up 10% from US market close on T), the 3x Long DLC gains 30% to $1.30.
  • If the stock closes at $115 (up 15% from US market close on T) in US regular trading on T+1, the intrinsic close of the 3x Long DLC will be at $1.45, a 45% gain on a US close-to-close basis.

Tesla DLCs as an example: Investors can take intraday positions during Asia hours to position for news, or hold over a longer period to ride on election momentum: 

• Robotaxi event: Tesla’s shares fluctuated by around 9% during the highly anticipated Robotaxi event last October. The shares gained around 5% at the onset of the event but dropped to around -4% within 15 minutes, as investors were disappointed by the lack of a clear production timeline. Both long and short DLCs were used by investors, achieving a combined turnover of S$0.5 million by midday.
• Third-quarter earnings release: Tesla shares rose 12% in US after-hours trading on 23 October and the 3x Long DLC (TSYW) opened over 30% higher on 24 October. Tesla shares continued to climb 22% during US trading hours, marking the largest single-day gain in 11 years. The intrinsic close of TSYW was $5.55 at the US market close on 24 October, up 65% from 23 October. 
• US election results: TSYW magnified Tesla’s gains during Asian hours when the US election results came in. Since Trump’s victory, Tesla shares have surged, driven by enthusiasm for the Full Self-Driving (FSD) update and Elon Musk’s potential influence in the Trump administration, which could expedite regulatory approvals. As of 17 December, Tesla closed at a new all-time high. The 3x Long DLC (TSYW) surged 455% since issuance from $5 to $27.738 on 17 December, while the 3x Short DLC (TSXW) dropped 95% over the same period.  
  • Airbag mechanism: The airbag mechanism may trigger during US hours when SGX is closed. On Tesla’s third-quarter earnings release day, as Tesla’s share price rose more than 20%, the airbag mechanism was triggered on the short DLC (TSXW). Once triggered, the airbag mechanism reduces exposure to Tesla shares when share price continued to rise, slowing down the rate of loss. However this also consequently limited the DLC’s ability to recoup losses when Tesla’s share price fell. The cumulative returns on the long and short DLCs therefore do not mirror each other. 
  • Risk note: The airbag mechanism may only be triggered during US hours when SGX is closed, posing a risk of significant or total loss overnight where investors will not be able to exit their DLC positions at that time. For a 3x leverage DLC to be completely wiped out overnight, the underlying US stock must experience an intraday drop (for Long DLCs) or rise (for Short DLCs) of ~33% during US trading hours.  

When considering whether to invest directly in Tesla shares or DLCs, it is important for investors to recognize that DLCs are generally designed for short-term trading rather than long-term holding, due to the compounding effect and associated costs and fees. These leveraged products are intended for SIP investors, with a risk of complete loss in initial investment. 

Investors seeking leveraged exposure to Tesla shares at a fraction of its price, those looking to hedge their Tesla holdings, or opportunists aiming to trade on news during Asia hours, such as the Trump inauguration and fourth-quarter earnings, can consider trading DLCs. 

For more information on DLCs, visit https://www.sgx.com/dlc.

Download DLC factsheets and FAQ document for the full suite of DLCs available on the SGX market and more about investor suitability, risks, as well as cost and fees involved. 

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