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The Economic Times

Top quant strategy for the week ahead

By Motilal Oswal Financial Services

Option Writing

Strategy 1
Writing against Cash / Futures Holding
Sell HDFC 2220 CE 31-OCT-19 AT `19.30
Target Level : 0.50
Stop Loss Level : 29
Gross Monthly Yield : 0.85%
ROI : 5.80%
Margin : `1,62,000
Days to Expiry : 32

Writing with Hedging
Leg 1: Sell HDFC LTD 2220 CE 31-OCT-19
AT `19.30
Leg 2: Buy HDFC LTD 2400 CE 31-OCT-19
AT `4.60
Target Level : 0.35
Stop Loss (Spread) Level : 23
Gross Monthly Yield : 0.65%
ROI : 4.50%
Margin : `1,59,000
Days to Expiry : 32


Strategy 2
Writing against Futures Holding
Sell TCS 2240 CE 31-OCT-19 AT `20.65
Target Level : 0.50
Stop Loss Level : 31
Gross Monthly Yield : 0.90%
ROI : 6.25%
Margin : `80,500
Days to Expiry : 32

Writing with Hedging
Leg 1: Sell TCS 2240 CE 31-OCT-19
AT `20.65
Leg 2: Buy TCS 2400 CE 31-OCT-19
AT `5.55
Target Level : 0.40
Stop Loss (Spread) Level : 24
Gross Monthly Yield : 0.65%
ROI : 4.65%
Margin : `79,000
Days to Expiry : 32

Pair Trading
Strategy 1
Leg 1: BUY BAJFINANCE 1 LOT 31-OCT-19
AT `4,073.90 AND 14 SHARES IN CASH
Leg 2 : SELL BAJAJ FINSERV 1 LOT
31-OCT-19 AT `8,601.50
Tenure : 7-8 Days
Target Profit : 2.90%
Stop Loss : 1.40%
Margin : `5,25,000

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 0.49 so may continue to bounce with stability in
Bajaj Finserv and buying interest in Bajaj Finance as per its statistical data of 2SD band.

Pair Trading
Strategy 2
Leg 1: BUY AMBUJACEM 1 LOT 31-OCT-19
AT `208.15 AND 665 SHARES IN CASH
Leg 2: SELL ACC 1 LOT 31-OCT-19 AT `1,645
Tenure : 7-8 Days
Target Profit : 2.65%
Stop Loss : 1.50%
Margin : `3,88,000

This pair has 87% correlation over the last one year. It has a trade lot ratio of 0.80 with price ratio of 7.9. We are expecting
the ratio to narrow down as per its statistical data of 2SD band with a view to outperformance of Ambuja Cement.
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