Top quant strategies for the week ahead

By Motilal Oswal Financial Services

Option Writing
STRATEGY 1
Writing against Cash / Future Holding

Sell INDUSINDBK 1600 CE 26-DECEMBER-19 @ `9.00
Target Level : 0.05
Stop Loss Level : 13.50
Gross Monthly Yield : 1.05%
ROI : 3.95%
Margin : `90,000
Days to Expiry : 18
Writing with Hedging
Leg 1: Sell INDUSINDBK 1600 CE DECEMBER 26, 19 @ `9.00
Leg 2: Buy INDUSINDK 1680 CE
26-NOVEMBER-19 @ 2.90
Target Level : 0.05
Stop Loss (Spread) Level : 9.50
Gross Monthly Yield : 0.70%
ROI : 2.70%
Margin : `89,000
Days to Expiry : 18

STRATEGY 2
Writing against Fut Holding
Sell ESCORTS 680 CE DECEMBER 26, 19 @ `3.9
Target Level : 0.05
Stop Loss Level : 5.95
Gross Monthly Yield : 1.05%
ROI : 4.15%
Margin : `101,600
Days to Expiry : 18
Writing with Hedging
Leg 1: Sell ESCORTS 680 CE DECEMBER 26, 19 @ `3.9
Leg 2: Buy ESCORTS 740 CE DECEMBER 26, 19 @ `0.8
Target Level : 0.05
Stop Loss (Spread) Level : 4.58
Gross Monthly Yield : 0.85%
ROI : 3.30%
Margin : `1,00,600
Days to Expiry : 18

Pair Trading
STRATEGY 1
Leg 1 : BUY HDFC 1 LOT DECEMBER 26, 19 @
`2275.30 AND 25 SHARES IN CASH
Leg 2 : SELL HDFC BANK 1 LOT
26-DECEMBER-19 @ 1250.90
Tenure : 7-8 Days
Target Profit : 2.80%
Stop Loss : 1.35%
Margin : `2,68,000

This pair has 90% correlation over the last few weeks post its ex corporate action. Pair has trade lot ratio of 1.10 with price ratio of 1.82. We are expecting the ratio to widen further as per its statistical data.

Pair Trading
STRATEGY 2
Leg 1 : BUY HDFC BANK 2 LOT 25-JULY-19 @ `2396.25
Leg 2 : SELL HDFC LTD 1 LOT 25-JULY-19
@ `2241.05
Tenure : 7-8 Days
Target Profit : 2.75%
Stop Loss : 1.40%
Margin : `4,12,000

This pair has 92% correlation over the last one year. Pair (BAJAJFINSV /BAJFINANCE) has trade lot ratio of 1.12 with price ratio of 2.24. We are expecting the ratio to narrow down as per its 2SD band with the view to outperformance of Bajaj Finance .