Top quantitative trading tips for the week

By Shubham Agarwal, Head of Quantitative Research, MOSL

Option Writing - Strategy 1
Writing against Cash / Fut Holding
Sell KPIT 160 CE 30-NOV-17 @3.90
Target level: Rs 0.5
Stop Loss level: Rs 5.2
Gross Monthly Yield: 2.67%
ROI: 24%
Margin: ~Rs 63,400
Days to expiry: 24

Strategy 2
Writing against Fut Holding
Sell DHFL 650 30-NOV-17 PE @20.75
Target Level: Rs 4
Stop Loss level: Rs 25
Gross Monthly Yield: 3.88%
ROI: 28.90%
Margin: ~Rs 107,550
Days to expiry: 24

Writing with Hedging
Leg 1: Sell KPIT 160 CE 30-NOV-17 @3.90
Leg 2: Buy KPIT 165 CE 30-NOV-17 @2.20
Target level: Rs 0.10
Stop Loss (Spread) level: Rs 2.50
Gross Monthly Yield: 1.40%
ROI: 16%
Margin: ~Rs 41,400
Days to expiry: 24

Writing with Hedging
Leg 1: Sell DHFL 650 30-NOV-17 PE @20.75
Leg 2: Buy DHFL 640 30-NOV-17 PE @16.45
Target Level: Rs 0.25
Stop Loss (Spread) level: Rs 6.00
Gross Monthly Yield: 0.80%
ROI: 7.80%
Margin: ~Rs 82,650
Days to expiry: 24
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. 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.

Pair Trading
Strategy 1
Leg 1: Buy MINDTREE 1Lot
30-NOV-17 @490.50
Leg 2: Sell JUSTDIAL 1 Lot
30-NOV-17 @477.5
Tenure: 3-4 days
Target Profit: 3.25%
Stop Loss: 1.25%
Margin: Rs 162,000

Pair Trading
Strategy 2
Leg 1: Buy RBLBANK 1 Lot 30-NOV-17
@522 and 665 shares in cash
Leg 2: Sell ICICIBANK 1 Lot 30-NOV-17
@316
Tenure: 3-4 days
Target Profit: 3.25 %
Margin: Rs 182,000
Stop Loss: 1.25% .
Volatility is expected to fall based on forecasted volatility model ‘GARCH’ along with accelerated time decay in final week to expiry.