Top quant strategies for the week ahead

By Motilal Oswal Securities

Option Writing
STRATEGY 1
Writing against Cash / Fut Holding

Sell LICHSGFIN 490 CE 31-JANUARY-19 at `1.60
Target Level : 0.05
Stop Loss Level : 2.35
Gross Monthly Yield : 2.60 per cent
ROI : 2.20 per cent
Margin : `77,500
Days to Expiry : 4

Writing with Hedging
Leg 1: Sell LICHSGFIN 490 CE 31-JAN-19 at `1.60
Leg 2: Buy LICHSGFIN 520 CE 31-JAN-19 at `0.55
Target Level : 0.05
Stop Loss (Spread) Level : 1.60
Gross Monthly Yield : 1.65 per cent
ROI : 1.45 per cent
Margin : `77,000
Days to Expiry : 4

STRATEGY 2

Writing against Fut Holding
Sell BAJAJ AUTO 2750 CE 31-JAN-19 at `13.95
Target Level : 0.05
Stop Loss Level : 21
Gross Monthly Yield : 4 per cent
ROI : 3.45 per cent
Margin : `1,01,000
Days to Expiry : 4

Writing with Hedging
Leg 1: Sell BAJAJ AUTO 2750 CE 31-JAN-19 at `13.95
Leg 2: Buy BAJAJ AUTO 2850 CE 31-JAN-19 at `4.25
Target Level : 0.05
Stop Loss (Spread) Level : 14.50
Gross Monthly Yield : 2.75 per cent
ROI : 2.40 per cent
Margin : `99,500
Days to Expiry : 4

Pair Trading
STRATEGY 1
Leg 1: BUY GAIL 1 LOT 31-JAN-19 at `335.35
Leg 2 : SELL IGL 1 LOT 31-JAN-19 at `272.20
Tenure : 4 Days
Target Profit : 3.15 per cent
Stop Loss : 1.65 per cent
Margin : `2,90,000

This pair has 83 per cent correlation over the last one year. It has Trade lot ratio of 0.80 with price ratio of 1.23 so theoretically it’s a partial hedge pair. As per statistical data it has diverted from its means and may result in outperformance of Gail compared to the IGL after a long consolidation.

Pair Trading
STRATEGY 2
Leg 1: BUY TWO LOTS OF HDFC BANK
31-JAN-19 at `2,097.95
Leg 2: SELL 1 LOT HDFC 31-JAN-19 at `1,976.35
Tenure : 4 Days
Target Profit : 2.50 per cent
Stop Loss : 1.20 per cent
Margin : `3,61,500

This pair has 98 per cent correlation over the last one year. Pair (HDFC / 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 110 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.