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Top quantitative strategies this week

By Motilal Oswal Securities

Option Writing

STRATEGY 1
Writ..

By Motilal Oswal Securities

Option Writing

STRATEGY 1
Writing against Cash / Fut Holding
Sell AXIS BANK 590 CE 25-JAN-18 @ 5.00
Target Level : 0
Stop Loss Level : 7.50
Gross Monthly Yield : 2 per cent
ROI : 10.50 per cent
Margin : 57,000
Days to Expiry : 11

Writing with Hedging
Leg 1 : Sell AXIS BANK 590 CE 25-JAN-18 @ 5.00
Leg 2 : Buy AXIS BANK 610 CE 25-JAN-18 @ 2.45
Target Level : 0
Stop Loss (Spread) Level : 3.75
Gross Monthly Yield : 1.10 per cent
ROI : 5 per cent
Margin : 54,000
Days to Expiry : 11

STRATEGY 2
Writing against Cash / Future Holding
Sell UNIONBANK 150 CE 25-JAN-18 @ 1.20
Target Level : 0
Stop Loss Level : 1.80
Gross Monthly Yield : 2 per cent
ROI : 9.35 per cent
Margin : 51,500
Days to Expiry : 11

Writing with Hedging
Leg 1 : Sell UNIONBANK 150 CE 25-JAN-18 @ 1.20
Leg 2 : Buy UNIONBANK 160 CE 25-JAN-18 @ 0.60
Target Level : 0
Stop Loss (Spread) Level : 1
Gross Monthly Yield : 1 per cent
ROI : 5 per cent
Margin : 47,500
Days to Expiry : 11

This pair has 96 per cent correlation over the past year. Pair has Trade lot ratio of 1.10 with price ratio of 0.95. It is well co-integrated and one of the best pair to deliver the consistent return in last one year. Recently it took time to get back to its mean but the change in trend was seen in the previous week which could again take it to mean with its normal distribution.

Pair Trading

STRATEGY 1
Leg 1 : Buy HDFC LTD 1 LOT 25-JAN-18 @
1760.35 and 29 shares in cash
Leg 2 : Sell HDFC Bank 1 LOT 25-JAN-18 @
1861.75
Tenure : 5-6 Days
Target Profi t : 3.50 per cent
Stop Loss : 1.75 per cent
Margin : 3,35,000
This pair has 95 per cent correlation over the last one year. It has trade lot ratio of 1.1 with price ratio of 0.66. The pair is well cointegrated and slightly skewed to its mean so expecting IGL to outperform the GAIL as per its statistical data.

STRATEGY 2
Leg 1 : Buy IGL 1 LOT 25-JAN-18 @ 328.05
and 258 Shares in cash
Leg 2 : Sell GAIL 1 LOT 25-JAN-18 @ 493.45
Tenure : 6-7 Days
Target Profi t : 4.15 per cent
Stop Loss : 2 per cent
Margin : 3,80,000

This pair has 95 per cent correlation over the last one year. It has trade lot ratio of 1.1 with price ratio of 0.66. The pair is well cointegrated and slightly skewed to its mean so expecting IGL to outperform the GAIL as per its statistical data.

Original Article

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