Top quant strategies for the week ahead

By Motilal Oswal Securities

Option Writing
STRATEGY 1
Writing against Cash / Fut Holding

Sell GAIL 360 CE 31-JANUARY-19 at `2.65
Target Level : 0.05
Stop Loss Level : 3.95
Gross Monthly Yield : 1.30 per cent
ROI : 9 per cent
Margin : `76,500
Days to Expiry : 18
Writing with Hedging
Leg 1: Sell GAIL 360 CE 31-JANUARY-19 at `2.65
Leg 2: Buy GAIL 380 CE 31-JANUARY-19 at `0.80
Target Level : 0.05
Stop Loss (Spread) Level : 2.75
Gross Monthly Yield : 0.90 per cent
ROI : 6.40 per cent
Margin : `74,500
Days to Expiry : 18

STRATEGY 2
Writing against Cash / Future Holding
Sell TATASTEEL 520 CE 31-JANUARY-19 AT `2.55
Target Level : 0.05
Stop Loss Level : 3.80
Gross Monthly Yield : 0.90 per cent
ROI : 6.30 per cent
Margin : `41,500
Days to Expiry : 18

Writing with Hedging
Leg 1: Sell TATASTEEL 520 CE 31-JAN-19 AT `2.55
Leg 2: Buy TATASTEEL 560 CE 31-JAN-19 AT `0.60
Target Level : 0.05
Stop Loss (Spread) Level : 2.85
Gross Monthly Yield : 0.70 per cent
ROI : 5 per cent
Margin : `40,500
Days to Expiry : 18


Pair Trading
STRATEGY 1
Leg 1 : BUY HDFC BANK 2 (Two) LOT
31-JANUARY-19 AT `2,120.90
Leg 2 : SELL HDFC LTD 1 LOT 31-JANUARY-19
AT `1,996.90
Tenure : 7-8 Days
Target Profit : 3.40 per cent
Stop Loss : 1.65 per cent
Margin : `3,60,000

This pair has 98 per cent correlation over the last one year. Pair (HDFC Ltd / HDFC Bank) has Trade lot ratio of 0.53 with price ratio of 0.94. It has been moving in a price spread difference of 120 to 180 points from last couple of weeks. Expecting spread to slightly widen towards its 3 months mean with expected spread of 150 to 170 points as per its statistical data on 2SD band.


Pair Trading
STRATEGY 2
Leg 1 : BUY DABUR 2 (Two) LOT
31-JANUARY-19 AT `423.95
Leg 2 : SELL HINDUNILVR 1 LOT
31-JANUARY-19 AT `1,778.90
Tenure : 7-8 Days
Target Profit : 3.50 per cent
Stop Loss : 1.75 per cent
Margin : `3,71,000

This pair has 93 per cent correlation over the last one year. It has Trade lot ratio of 2 with price ratio of 0.24. As per statistical data it has skewed from its means and set to come towards its mean zones with outperformance nature of Dabur.