Top quantitative strategies for the week

By Motilal Oswal Securities

Option Writing

STRATEGY 1

Writing against Cash / Fut Holding
Sell UNION BANK 140 CE 22-FEB-18 @ 1.75
Target Level : 0.25
Stop Loss Level : 2.50
Gross Monthly Yield : 1.75 per cent

ROI : 11 per cent
Margin : `52,500
Days to Expiry : 18

Writing with Hedging

Leg 1: Sell UNION BANK 140 CE 22-FEB-18 @ 1.75
Leg 2: Buy UNION BANK 150 CE 22-FEB-18 @ 0.85
Target Level : 0.10
Stop Loss (Spread) Level : 1.35
Gross Monthly Yield : 1.25 per cent
ROI : 6 per cent
Margin : `51,500
Days to Expiry : 18

STRATEGY 2

Writing against Fut Holding

Sell TATAMOTORS 420 CE 22-FEB-18 @ 5.75
Target Level : 1.25
Stop Loss Level : 8
Gross Monthly Yield : 2 per cent
ROI : 12 per cent
Margin : `56,000
Days to Expiry : 18

Writing with Hedging

Leg 1: Sell TATAMOTORS 420 CE 22-FEB-18 @ 5.75
Leg 2: Buy TATAMOTORS 440 CE 22-FEB-18 @ 3.05
Target Level : 1
Stop Loss (Spread) Level : 3.60
Gross Monthly Yield : 1 per cent
ROI : 5 per cent
Margin : `50,500
Days to Expiry : 18

Pair Trading

STRATEGY 1

Leg 1: Buy IOC 1 LOT 22-FEB-18 @ 388.40
Leg 2: Sell HINDPETRO 1 LOT 22-FEB-18
@ 370.60
Tenure : 6-7 Days
Target Profi t : 3.15 per cent
Stop Loss : 1.50 per cent
Margin : `1,88,500

This pair has 95 per cent correlation over the last one year. Pair has Trade lot ratio of 1.05 with price ratio of 1. The pair is well co-integrated and turned higher to its mean so expecting it to test the upper band of 2 SD as per statistical data.

Pair Trading

STRATEGY 2

Leg 1: Buy HDFC BANK 1 LOT 22-FEB-18
@ 1954.7
Leg 2: Sell HDFC LTD 1 LOT 22-FEB-18 @ 1910.7
Tenure : 7-8 Days
Target Profi t : 3.10 per cent
Stop Loss : 1.75 per cent
Margin : `3,05,000

This pair has 96 per cent correlation over the last one year. Pair has Trade lot ratio of 1.02 with price ratio of 1. It is well co-integrated and one of the best pair to deliver the consistent return in last one year. Expecting pair it to oscillate in between 0.96 to 1.08 for next coming sessions so suggesting the pair as it has been consolidate in between net difference of 15 to 100 points.