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Top quant strategies for the week ahead

This pair has 92% correlation over the last one year. Pair (BAJAJFINSV /BAJFINANCE) has trade lot ratio of 1.21 with price ratio of 2.24.

ET Bureau|
Dec 02, 2019, 08.06 AM IST
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This pair has 90% correlation over the last few weeks post its ex corporate action. The pair has trade lot ratio of 1.11 with price ratio of 1.81.

By Motilal Oswal Financial Services

Option Writing
STRATEGY 1
Writing against Cash / Fut Holding
Sell AXISBANK 800 CE 26-DECEMBER-19 @ `4.55
Target Level : 0.05
Stop Loss Level : 6.85
Gross Monthly Yield : 0.70%
ROI : 3.95%
Margin : ` 1,36,000
Days to Expiry : 25
Writing with Hedging
Leg 1 : Sell AXISBANK 800 CE 26-DECEMBER-19 @ ` 4.55
Leg 2 : Buy AXISBANK 840 CE 26-DECEMBER-19 @ ` 1.25
Target Level : 0.05
Stop Loss (Spread) Level : 5.05
Gross Monthly Yield : 0.50%
ROI : 2.90%
Margin : ` 1,34,000
Days to Expiry : 25

STRATEGY 2
Writing against Fut Holding
Sell TATAMOTORS 190 CE 26-DECEMBER-19 @ ` 1.70
Target Level : 0.10
Stop Loss Level : 2.50
Gross Monthly Yield : 1.10%
ROI : 5.55%
Margin : ` 86,000
Days to Expiry : 25
Writing with Hedging
Leg 1 : Sell TATAMOTORS 190 CE 26-DECEMBER-19 @ ` 1.70
Leg 2 : Buy TATAMOTORS 210 CE 26-DECEMBER-19 @ ` 0.60
Target Level : 0.10
Stop Loss (Spread) Level : 1.70
Gross Monthly Yield : 0.70%
ROI : 3.55%
Margin : ` 84,000
Days to Expiry : 25

Pair Trading
STRATEGY 1
Leg 1 : BUY HDFC 1 LOT 26-DECEMBER-19 @
` 2308.50 AND 27 SHARES IN CASH
Leg 2 : SELL HDFC BANK 1 LOT
26-DECEMBER-19 @ ` 1277.40
Tenure : 7-8 Days
Target Profit : 3.15%
Stop Loss : 1.55%
Margin : ` 2,76,000

This pair has 90% correlation over the last few weeks post its ex corporate action. The pair has trade lot ratio of 1.11 with price ratio of 1.81. We are expecting the ratio to widen to 1.82-1.84 as per its statistical data.

Pair Trading
STRATEGY 2
Leg 1 : BUY BAJFINANCE 1 LOT 26-DECEMBER-19
@ ` 4094.85 AND 30 SHARES IN CASH
Leg 2 : SELL BAJAJFINSV 1 LOT
26-DECEMBER-19 @ ` 9155.60
Tenure : 7-8 Days
Target Profit : 3.80%
Stop Loss : 1.90%
Margin : ` 5,07,000

This pair has 92% correlation over the last one year. Pair (BAJAJFINSV /BAJFINANCE) has trade lot ratio of 1.21 with price ratio of 2.24. We are expecting the ratio to narrow down as per its 2SD band with the view to outperformance of BAJAJ FINANCE.

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