Top quantitative strategies for the week

By Motilal Oswal Securities

Option Writing
STRATEGY 1

Writing against Cash / Fut Holding
Sell UNION BANK 110 CE 28-MARCH-18 @ 0.85
Target Level : 0.10

Stop Loss Level : 1.25
Gross Monthly Yield : 1.60 per cent
ROI : 5.65 per cent
Margin : `60,000
Days to Expiry : 17

Writing with Hedging
Leg 1: Sell UNION BANK 110 CE
28-MARCH-18 @ 0.85
Leg 2: Buy UNION BANK 120 CE
28-MARCH-18 @ 0.45
Target Level : 0
Stop Loss (Spread) Level : 0.65
Gross Monthly Yield : 0.80 per cent
ROI : 4.50 per cent
Margin : `57,500
Days to Expiry : 17

STRATEGY 2
Writing against Cash / Future Holding
Sell TATAMOTOR 370 CE 28-MARCH-18 @ 2.30
Target Level : 0.30
Stop Loss Level : 3.30
Gross Monthly Yield : 1 per cent
ROI : 4.40 per cent
Margin : `65,500
Days to Expiry : 17

Writing with Hedging
Leg 1 : Sell TATAMOTOR 370 CE
28-MARCH-18 @ 2.30
Leg 2 : Buy TATAMOTOR 380 CE
28-MARCH-18 @ 1.30
Target Level : 0
Stop Loss (Spread) Level : 2
Gross Monthly Yield : 0.50 per cent
ROI : 4 per cent
Margin : `64,500
Days to Expiry : 17

Pair Trading
STRATEGY 1
Leg 1: Buy HDFC BANK 1 LOT 28-MARCH-18
@ 1849.2
Leg 2: Sell HDFC 1 LOT 28-MARCH-18 @ 1815.2
Tenure : 6-7 Days
Target Profi t : 3.75 per cent
Stop Loss : 1.70 per cent
Margin : `2,90,000

This pair has 96 per cent correlation over the last one year. Pair has Trade lot ratio of 1 with price ratio of 1.02. It is well co-integrated and one of the best pair to deliver the consistent return in last one year. Expecting it to move towards upper band as by its nature as it skewed to its mean levels.

Pair Trading
STRATEGY 2
Leg 1: Buy AMBUJACEM 1 LOT 28-MARCH-18
@ 235.70 and 109 Shares in Cash
Leg 2: Sell ACC 1 LOT 28-MARCH-18 @ 1537.10
Tenure : 5-6 Days
Target Profi t : 3.40 per cent
Stop Loss : 1.70 per cent
Margin : `2,02,500

This pair has 97 per cent correlation over the last one year. Pair has Trade lot ratio of 1 with price ratio of 0.15. Pair has gone lower to its average mean thus, expecting it to move back to statistical averages