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Top quant strategies for the week ahead

This pair has 90% correlation over the last few weeks post its ex corporate action.

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Last Updated: Nov 25, 2019, 08.17 AM IST|Original: Nov 25, 2019, 08.17 AM IST
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Pair (ACC/Ambuja cem) has trade lot ratio of 0.85 with price ratio of 7.35.
By Motilal Oswal Financial Service

Option Writing
STRATEGY 1
Writing against Cash / Fut Holding
Sell TATAMOTORS 175 CE 28-NOV-19 AT `1
Target Level : 0.05
Stop Loss Level : 1.50
Gross Monthly Yield : 4.20%
ROI : 2.89%
Margin : `98,600
Days to Expiry : 4
Writing with Hedging
Leg 1: Sell TATMOTORS 175 CE 28-NOV-19 AT `1
Leg 2: Buy TATAMOTORS 190 CE 28-NOV-19 AT `0.30
Target Level : 0.05
Stop Loss (Spread) Level : 1.05
Gross Monthly Yield : 2.80%
ROI : 2.35%
Margin : `83,000
Days to Expiry : 4

STRATEGY 2
Writing against Cash / Future Holding
Sell INFY 730 CE 28-NOV-19 AT `3.20
Target Level : 0.05
Stop Loss Level : 4.85
Gross Monthly Yield : 3.14%
ROI : 2.9%
Margin : `129,000
Days to Expiry : 4
Writing with Hedging
Leg 1: Sell INFY 730 CE 28-NOV-19 AT `3.20
Leg 2: Buy INFY 760 CE 28-NOV-19 AT `1.10
Target Level : 0.05
Stop Loss (Spread) Level : 3.20
Gross Monthly Yield : 2.05%
ROI : 1.95%
Margin : `1,24,000
Days to Expiry : 4

Pair Trading
STRATEGY 1
Leg 1 : BUY HDFC 1 LOT 28-NOV-19 AT
`2236.70 AND 33 SHARES IN CASH
Leg 2 : SELL HDFC BANK 1 LOT 28-NOV-19 AT
`1265.90
Tenure : 4 Days
Target Profit : 2.80%
Stop Loss : 1.35%
Margin : `2,85,000

This pair has 90% correlation over the last few weeks post its ex corporate action. Pair has trade lot ratio of 1.13 with price ratio of 1.77. We are expecting the ratio to widen to 1.80 as per its statistical data.

STRATEGY 2
Leg 1: BUY AMBUJACEM 1 LOT 28-NOV-19 AT
`200.60 AND 435 SHARES IN CASH
Leg 2: SELL ACC 1 LOT 28-NOV-19 AT `1472.60
Tenure : 4 Days
Target Profit : 2.80%
Stop Loss : 1.35%
Margin : `2,80,000

This pair has 85% correlation over the last one year. Pair (ACC/Ambuja cem) has trade lot ratio of 0.85 with price
ratio of 7.35. We are expecting the ratio to narrow down as per its 2SD band with the view to outperformance of
Ambuja Cement.

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