Top quant plays for the week

By Shubham Agarwal, Head of Quantitative Research, MOSL

Option Writing - STRATEGY 1

Writing against Cash / Fut Holding:
Sell BANKBARODA 155 31AUG17 CE @ 3.15
Target level : Rs 0.05
Stop Loss level : Rs 4.30
Gross Monthly Yield : 3.05 per cent
ROI :12.85 per cent
Margin : ~Rs 85,768
Days to expiry : 17

Writing with Hedging:
Leg 1: Sell BANKBARODA 155 31AUG17 CE @ 3.15
Leg 2: Buy BANKBARODA 160 31AUG17 CE @
2.05
Target level : Rs 0.05
Stop Loss (Spread) level : Rs 1.55
Gross Monthly Yield : 1.3 per cent
ROI : 5.13. per cent
Margin : ~Rs 75,000
Days to expiry :17

STRATEGY 2

Writing against Fut Holding:
Sell RELCAPITAL 31AUG17 730 PE @ 19.80
Target Level : Rs 0.05
Stop Loss level : Rs 26
Gross Monthly Yield : 4.07 per cent
ROI : 18 per cent
Margin : ~Rs 1,65,900
Days to expiry : 17

Writing with Hedging:
Leg 1: Sell RELCAPITAL 31AUG17 730 PE @ 19.80
Leg 2: Buy RELCAPITAL 31AUG17 720 PE @ 16.30
Target Level : INR 0.05
Stop Loss (Spread) level : INR 5.10
Gross Monthly Yield : 0.82 per cent
ROI : 3.50 per cent
Margin : ~Rs 1,46,950
Days to expiry : 17
Volatility is expected to fall based on forecasted volatility model ‘GARCH’ along with accelerated time decay in fi nal week to expiry.

Pair Trading - STRATEGY 1
Leg 1: Buy DHFL 1 Lot 31-AUG-17 @ 420
Leg 2: Sell BAJAJFINSV 1 Lot 31-AUG-17
@5,025
Tenure : 3 days
Target Profi t : 3.5 per cent
Stop Loss : 1.5 per cent
Statistical reversion is expected in the pair based on our mean-reversion model. The pair is co-integrated and passes the stationary test. The distribution is around normal

STRATEGY 2
Leg 1: Buy DISHTV 1 Lot 31-AUG-17 @ 71.35 &
2,300 shares in cash
Leg 2: Sell ZEEL 1 Lot 31-AUG-17 @ 510
Tenure : 3 days
Target Profi t : 3.5 per cent
Stop Loss : 1.5
The pair is well co-integrated. The distribution is not normal and skewed to the left and has evidence of a reversion within its own distribution.