Top Quant trade ideas for the week

Top quantitative strategies for the week by Shubham Agrawal, Head of Quantitative Research at Motilal Oswal Securities.

Option Writing

Strategy 1

Writing against Cash / Fut Holding
Sell LUPIN 1020 31AUG17 CE@21.85

Target level: Rs 0.05
Stop Loss level: Rs 29
Gross Monthly Yield: 2.38%
ROI:14.90 per cent
Margin: ~Rs 58,540
Days to expiry: 24

Writing with Hedging
Leg 1: Sell LUPIN 1020 31AUG17 CE@21.85
Leg 2: Buy LUPIN 1040 31AUG17 CE@14.60

Target level: Rs 0.05
Stop Loss (Spread) level: Rs 11.00
Gross Monthly Yield: 0.92 per cent
ROI: 5.50. per cent
Margin: ~Rs 52,700
Days to expiry: 24

Strategy 2

Writing against Fut Holding
Sell TATASTEEL 31AUG17 560 PE@10.30

Target Level: Rs 0.05
Stop Loss level: Rs 14
Gross Monthly Yield: 2.04 per cent
ROI: 12.5 per cent
Margin: ~Rs 164,600
Days to expiry: 24

Writing with Hedging
Leg 1: Sell TATASTEEL 31AUG17 560 PE@10.30
Leg 2: Buy TATASTEEL 31AUG17 540 PE@6.50
Target Level: Rs 0.05
Stop Loss (Spread) level: Rs 5.50
Gross Monthly Yield: 0.82 per cent
ROI: 5.00 per cent
Margin: ~Rs 151,600
Days to expiry: 24

Pair Trading - Strategy 1

Leg 1: Buy LICHSGFIN 1 Lot 31-AUG-17
@ 682.50 & 40 shares in cash
Leg 2: Sell UJJIVAN 2 Lots
31-AUG-17@323
Tenure: 3 days
Target Profi t: 3 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.

Pair Trading - Strategy 2

Leg 1: Buy RBLBANK 2 Lots
31-AUG-17@513.2
Leg 2: Sell INDUSINDBK 1 Lot
31-AUG-17@1674
Tenure: 3 days
Target Profi t: 3 per cent
Stop Loss: 1.00 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.