By Shubham Agarwal, Head of quantitative research at MOSL

Option Writing

STRATEGY 1

Writing against Cash / Fut Holding
Sell GLENMARK 660 28SEP17 CE @ 3.30
Target level : Rs 0.05
Stop Loss level : Rs 4.40
Gross Monthly Yield : 3.94%
ROI : 6.43%
Margin : ~Rs 35,910
Days to expiry : 4

Writing with Hedging
Leg 1: Sell GLENMARK 660 28SEP17 CE @ 3.30
Leg 2: Buy GLENMARK 680 28SEP17 CE @ 1.45
Target level : Rs 0.05
Stop Loss (Spread) level : Rs 2.30
Gross Monthly Yield : 2.20%
ROI : 3.71.%
Margin : ~Rs 34,860
Days to expiry : 4

STRATEGY 2

Writing against Fut Holding
Sell CENTURYTEX 1220 28SEP17 PE @ 10.45
Target Level : Rs 0.05
Stop Loss level : Rs 13.50
Gross Monthly Yield : 6.27%
ROI : 10%
Margin : ~Rs 58,000
Days to expiry : 4

Writing with Hedging
Leg 1: Sell CENTURYTEX 1220 28SEP17 PE @ 10.45
Leg 2: Buy CENTURYTEX 1200 28SEP17 PE @ 5.80
Target Level : Rs 0.05
Stop Loss (Spread) level : Rs 6.20
Gross Monthly Yield : 2.72%
ROI : 4.65%
Margin : ~Rs 55,000
Days to expiry :4

Volatility is expected to fall based on forecasted volatility model ‘GARCH’ along with accelerated time decay in fi nal week to expiry.
Pair trading

STRATEGY 1

Leg 1: Buy RECLTD 1 Lot
28-SEP-17 @ 163.50 &
1750 shares in cash
Leg 2: Sell MFSL 1 Lot
28-SEP-17 @ 635.50
Tenure : 4 days
Target Profi t : 3.00%
Margin : 172000
Stop Loss : 1.25%
Pair Trading

Statistical reversion is expected in the pair based on our meanreversion model. The pair is co-integrated and passes the stationary test. The distribution is around normal.

STRATEGY 2
Leg 1: Buy ANDHRABANK
1 Lot 28-SEP-17 @ 57.45
Leg 2: Sell INDIANBK 1 Lot
28-SEP-17 @ 272
Tenure : 4 days
Target Profi t : 2.75 %
Margin :135000
Stop Loss : 1.00%

The pair is well cointegrated. The distribution is not normal and skewed to the left and has evidence of a reversion within its own distribution.