Top quant trade ideas for the week ahead

By Motilal Oswal

Option Writing
STRATEGY 1
Writing against Cash / Fut Holding
Sell TCS 2260 CE 27-FEB-20 AT `3.50

Target Level : 0.05
Stop Loss Level : 5.20
Gross Monthly Yield : 1.20%
ROI : 1%
Margin : `80,00
Days to Expiry : 4
Writing with Hedging
Leg 1: Sell TCS 2260 CE 27-FEB-20 AT `3.50
Leg 2: Buy TCS 2320 CE 27-FEB-20 AT `0.95
Target Level : 0.05
Stop Loss (Spread) Level : 3.80
Gross Monthly Yield : 0.9%
ROI : 0.8%
Margin : `79,000
Days to Expiry : 4
STRATEGY 2
Writing against Cash / Future Holding
Sell ASIANPAINT 1920 CE 27-FEB-20 AT `3.40
Target Level : 0.05
Stop Loss Level : 5
Gross Monthly Yield : 1.4%
ROI : 1.2%
Margin : `1,64,000
Days to Expiry : 4
Writing with Hedging
Leg 1: Sell ASIANPAINT 1920 CE 27-FEB-20 AT `3.40
Leg 2: Buy ASIANPAINT 2000 CE 27-FEB-20 AT `1.30
Target Level : 0.05
Stop Loss (Spread) Level : 3.10
Gross Monthly Yield : 0.8%
ROI : 0.8%
Margin : `1,63,000
Days to Expiry : 4

Pair Trading
STRATEGY 1
Leg 1: BUY AMBUJACEM 1 LOT 27-FEB-20 AT
`206.50 AND 205 SHARES IN CASH
Leg 2: SELL ACC 1 LOT 27-FEB-20 AT `1,426.00
Tenure : 4 Days
Target Profit : 3.10%
Stop Loss : 1.45%
Margin : `2,46,000

This pair has 85% correlation over the last one year. The pair (ACC/Ambuja Cement) has trade lot ratio of 1.10 with price ratio of 6.91. We are expecting the ratio to narrow down as per its 2SD band with the view to outperformance of Ambuja Cement.

STRATEGY 2
Leg 1: BUY BAJFINANCE 1 LOT 27-FEB-20 AT
`4,891.00
Leg 2: SELL BAJAJFINSV 1 LOT 27-FEB-20 AT
`9,727.00
Tenure : 4 Days
Target Profit : 4.40%
Stop Loss : 2.20%
Margin : `4,30,000

This pair has 85% correlation over the last one year. The pair has trade lot ratio of 0.99 with price ratio of 1.99. We are expecting the ratio to narrow down as per its 2SD band with the view to continue to outperformance of Bajaj Finance.