Top quantitative strategies for the week

BY MOTILAL OSWAL SECURITIES

Option Writing
STRATEGY 1
Writing against Cash / Future Holding
Sell ONGC 170 CE 29-NOVEMBER-18 @ 1.45

Target Level : 0.10
Stop Loss Level : 2.10
Gross Monthly Yield : 0.75 per cent
ROI : 6.50 per cent
Margin : Rs 77,000
Days to Expiry : 25

STRATEGY 2
Writing against Cash / Future Holding
Sell ITC 300 CE 29-NOVEMBER-18 @ 2.10
Target Level : 0.10
Stop Loss Level : 3
Gross Monthly Yield : 0.95 per cent
ROI : 5.50 per cent
Margin : Rs 87,000
Days to Expiry : 25

Writing with Hedging
Leg 1: Sell ONGC 170 CiE 29-NOV-18 @ 1.45
Leg 2: Buy ONGC 180 CE 29-NOV-18 @ 0.65
Target Level : 0.05
Stop Loss (Spread) Level : 1.10
Gross Monthly Yield : 0.65 per cent
ROI : 3.75 per cent
Margin : Rs 74,500
Days to Expiry : 25

Writing with Hedging
Leg 1: Sell ITC 300 CE 29-NOV-18 @ 2.10
Leg 2: Buy ITC 320 CE 29-NOV-18 @ 0.55
Target Level : 0.10
Stop Loss (Spread) Level : 2.20
Gross Monthly Yield : 0.70 per cent
ROI : 4 per cent
Margin : Rs 86,000
Days to Expiry : 25

Pair Trading
STRATEGY 1
Leg 1: BUY HDFC BANK 2 LOT
29-NOV-18 @ 1954.60
Leg 2: SELL HDFC LTD 1 LOT
29-NOV-18 @ 1825.60
Tenure : 7-8 Days
Target Profi t : 4.20 per cent
Stop Loss : 2.15 per cent
Margin : Rs 3,06,000

This pair has 97 per cent correlation over the last one year. Pair has Trade lot ratio of 0.50 (As lot size of HDFC Bank revised to 250 from 500) with price ratio of 0.93. It has been moving in a price spread difference of 120 to 330 points from last couple of series and recently it narrowed to 125 points. Expecting spread to widen again towards its 3 months mean as per its statistical data on 2SD band.

Pair Trading
STRATEGY 2
Leg 1 : BUY INDUSIND BANK 1
LOT 29-NOVEMBER-18 @ 1541.80
Leg 2 : SELL BHARATFIN 1 LOT
29-NOVEMBER-18 @ 953.50
Tenure : 6-7 Days
Target Profi t : 2.40 per cent
Stop Loss : 1.25 per cent
Margin : Rs 1,50,000

This pair has 93 per cent correlation over the last one year. It has trade lot ratio of 1 with price ratio of 1.62. Spread is trading as per its 2 Standard Deviation and has been moving in tandem for last one year since November 2017. Spread keeps on giving the opportunity to get the spread difference of 1 to 2 per cent in between even after being in tight spread range.