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Top quant strategy for the week ahead

This pair has 97% correlation over the last one year.

ET Bureau|
Nov 11, 2019, 08.02 AM IST
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We are expecting the ratio to narrow down as per its 2SD band with the view to outperformance of
Ambujacem.

By Motilal Oswal Financial Services

Option Writing
STRATEGY 1
Writing against Cash / Fut Holding
Sell L&T 1500 CE 28-NOV-19 @ `10.25
Target Level : 0.40
Stop Loss Level : 15.10
Gross Monthly Yield : 1.05%
ROI : 4.45%
Margin : `82,500
Days to Expiry : 18
Writing with Hedging
Leg 1 : Sell L&T 1500 CE 28-NOV-19 @ `10.25
Leg 2 : Buy L&T 1560 CE 28-NOV-19 @ `3.25
Target Level : 0.20
Stop Loss (Spread) Level : 11.20
Gross Monthly Yield : 0.75%
ROI : 3.15%
Margin : `81,000
Days to Expiry : 18
STRATEGY 2
Writing against Cash / Future Holding
Sell TCS 2240 CE 28-NOV-19 @ `16.05
Target Level : 0.40
Stop Loss Level : 24.10
Gross Monthly Yield : 1.15%
ROI : 4.70%
Margin : `83,000
Days to Expiry : 18
Writing with Hedging
Leg 1 : Sell TCS 2240 CE 28-NOV-19 @ `16.05
Leg 2 : Buy TCS 2340 CE 28-NOV-19 @ `5.35
Target Level : 0.25
Stop Loss (Spread) Level : 17.10
Gross Monthly Yield : 0.75%
ROI : 3.20%
Margin : `81,500
Days to Expiry : 18

Pair Trading
STRATEGY 1
Leg 1 : BUY BAJFINANCE 1 LOT 28-NOV-19 @
`4175.75
Leg 2 : SELL BAJAJ FINSERVE 1 LOT 28-NOV-
19 @ `8835.60
Tenure : 7-8 Days
Target Profit : 2.70%
Stop Loss : 1.30%
Margin : `3,81,000

This pair has 97% correlation over the last one year. Pair has trade lot ratio of 1.10 with price ratio of 0.47. It has been moving towards in ratio of 0.42 to 0.50 so may continue to bounce more with stability in Bajaj Finserve and buying
interest in Bajaj Finance as per its statistical data of 2SD band.


STRATEGY 2
Leg 1 : BUY AMBUJACEM 1 LOT 28-NOV-19 @
`201.80 AND 490 SHARES IN CASH
Leg 2 : SELL ACC 1 LOT 28-NOV-19 @ `1509
Tenure : 7-8 Days
Target Profit : 2.75%
Stop Loss : 1.40%
Margin : `2,96,000

This pair has 85% correlation over the last one year. Pair (ACC/Ambuja cem) has trade lot ratio of 0.80 with price ratio of 7.48. We are expecting the ratio to narrow down as per its 2SD band with the view to outperformance of
Ambujacem.

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