Top quant strategies for the week

By Shubham Agarwal, Head of Quantitative Research, MOSL

Option Writing - Strategy 1

Writing against Cash / Fut Holding
Sell BEL 180 31AUG17 PE @ 0.90
Target level : Rs 0.05
Stop Loss level : Rs 1.40
Gross Monthly Yield : 4.78 per cent
ROI : 6.04 per cent
Margin : ~Rs 67,000
Days to expiry : 3

Writing with Hedging:
Leg 1 : Sell BEL 180 31AUG17 PE @ 0.90
Leg 2 : Buy BEL 175 31AUG17 PE @ 0.30
Target level : Rs 0.05
Stop Loss (Spread) level : Rs 0.90
Gross Monthly Yield : 3.18 per cent
ROI : 4.46. per cent
Margin : ~Rs 60,000
Days to expiry : 3
Volatility is expected to fall based on forecasted volatility model ‘GARCH’ along with accelerated time decay in final week to expiry.

Strategy 2
Writing against Fut Holding
Sell PCJEWELLER 31AUG17 330 PE @ 1.55
Target Level : Rs 0.05
Stop Loss level : Rs 2.10
Gross Monthly Yield : 4.32 per cent
ROI : 5.25 per cent
Margin : ~Rs 88,650
Days to expiry : 3

Writing with Hedging
Leg 1: Sell PCJEWELLER 31AUG17 330 PE @ 1.55
Leg 2: Buy PCJEWELLER 31AUG17 320 PE @ 0.70
Target Level : Rs 0.05
Stop Loss (Spread) level : Rs 1.35
Gross Monthly Yield : 2.37 per cent
ROI : 3.11 per cent
Margin : ~Rs 81,750
Days to expiry : 3
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 L&TFH 1 Lot 31-AUG-17 @ 175 &
555 shares in cash
Leg 2: Sell BHARATFIN 1 Lot 31-AUG-17 @ 880
Tenure : 3 days
Target Profi t : 3.0 per cent
Stop Loss : 1.25 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 MRPL 1 Lot 31-AUG-17 @ 124.50 &
2900 shares in cash
Leg 2: Sell BPCL 1 Lot 31-AUG-17 @ 510
Tenure : 3 days
Target Profi t : 3.00 per cent
Stop Loss : 1.25 per cent
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.