Top quantitative strategies for the week

By Motillal Oswal Securitites

Option Writing

STRATEGY 1
Writing against Cash / Fut Holding
Sell Lupin 800 CE 31 MAY at Rs 11.90
Target Level : 1.90
Stop Loss Level : 17

Gross Monthly Yield : 1.35 per cent
ROI : 9.25 per cent
Margin : Rs 65,000
Days to Expiry : 18

Writing with Hedging

Leg 1 : Sell Lupin 800 CE 31 MAY at Rs 11.90
Leg 2 : Buy Lupin 840 CE 31 MAY at Rs 5.15
Target Level : 0
Stop Loss (Spread) Level : 10.50
Gross Monthly Yield : 1 per cent
ROI : 6.65 per cent
Margin : Rs 61,000
Days to Expiry : 18

STRATEGY 2
Writing against Cash / Future Holding
Sell PNB 105 CE 31 MAY at Rs 0.90
Target Level : 0.10
Stop Loss Level : 1.20
Gross Monthly Yield : 1 per cent
ROI : 6.30 per cent
Margin : Rs 51,000
Days to Expiry : 18

Writing with Hedging
Leg 1 : Sell PNB 105 CE 31 MAY at Rs 0.90
Leg 2 : Buy PNB 115 CE 31 MAY at Rs 0.35
Target Level : 0
Stop Loss (Spread) Level : 0.85
Gross Monthly Yield : 0.75 per cent
ROI : 4.50 per cent
Margin : Rs 49,000
Days to Expiry : 18

Pair Trading
STRATEGY 1
Leg 1 : Buy HDFC 1 LOT 31 MAY at Rs 1,928.80
Leg 2 : Sell HDFC BANK 1 LOT 31 MAY at Rs 2012.60
Tenure : 7-8 Days
Target Profi t : 3.95 per cent
Stop Loss : 1.85 per cent
Margin : Rs 2,44,000

This pair has 97 per cent correlation over the last one year. Pair has trade lot ratio of 1 with price ratio of 0.96. It has been moving in a spread of 15 to 115 points from last couple of quarters and as per statistical data expecting this pair to come towards its mean levels.

Pair Trading
STRATEGY 2
Leg 1 : Buy Godrej CP 1 LOT 31 MAY at Rs 1,078.45
Leg 2 : Sell Godrej Ind 1 LOT 31 MAY at Rs 593.70
Tenure : 6-7 Days
Target Profi t : 4.50 per cent
Stop Loss : 2.35 per cent
Margin : Rs 2,18,000

This pair has 89 per cent correlation over the last one year. Pair has trade lot ratio of 1 with price ratio of 1.82. As per statistical data, pair has deviated to the extreme zone of the trading band thus expecting it to move towards statistical mean levels.