By Motilal Oswal Financial Services
Option Writing
STRATEGY 1
Writing against Cash / Fut Holding
Sell SBIN 340 CE 27-FEB-20 AT `2.60
Target Level : 0.05
Stop Loss Level : 4.05
Gross Monthly Yield : 1%
ROI : 5.2%
Margin : `1,05,000
Days to Expiry : 25
Writing with Hedging
Leg 1: Sell SBIN 340 CE 27-FEB-20 AT `2.60
Leg 2: Buy SBIN 370 CE 27-FEB-20 AT `0.90
Target Level : 0.05
Stop Loss (Spread) Level : 2.60
Gross Monthly Yield : 0.65%
ROI : 3.50%
Margin : `1,45,000
Days to Expiry : 25
STRATEGY 2
Writing against Cash / Future Holding
Sell MARUTI 7400 CE 27-FEB-20 AT `48.10
Target Level : 0.05
Stop Loss Level : 71.25
Gross Monthly Yield : 0.90%
ROI : 4.35%
Margin : `1,07,000
Days to Expiry : 25
Writing with Hedging
Leg 1: Sell MARUTI 7400 CE 27-FEB-20 AT `48.10
Leg 2: Buy MARUTI 8000 CE 27-FEB-20 AT `10.35
Target Level : 0.05
Stop Loss (Spread) Level : 55
Gross Monthly Yield : 0.60%
ROI : 3.20%
Margin : `1,05,000
Days to Expiry : 25
Pair Trading
STRATEGY 1
Leg 1: BUY HDFCBANK 1 LOT 27-FEB-20 AT
`1,199.55
Leg 2: SELL HDFC 1 LOT 27-FEB-20 AT
`2,275.90
Tenure : 7-8 Days
Target Profit : 5.10%
Stop Loss : 2.50%
Marginq : `2,08,000
This pair has 90% correlation over the last few weeks post its ex-corporate action. Pair (HDFC/HDFCBANK) has trade lot ratio of 0.95 with price ratio of 1.90. Pair ratio may now take a pause, as 1.97-2.0 is upper band of this band as per the statistical data so expecting the ratio to now turn lower towards its half the way of mean which is 1.80.
STRATEGY 2
Leg 1 : BUY BAJFINANCE 1 LOT 27-FEB-20 AT
`4,282 AND 12 SHARES IN CASH
Leg 2 : SELL BAJAJFINSV 1 LOT 27-FEB-20
AT `8,951.70
Tenure : 7-8 Days
Target Profit : 4.30%
Stop Loss : 2.25%
Margin : `4,40,000
This pair has 85% correlation over the last one year. Pair (BAJAJFINSV /BAJFINANCE) has a trade lot ratio of
1.05 with price ratio of 2.10. We are expecting the ratio to narrow down as per its 2SD band with the view to
continue to outperformance of Bajaj Finance.
Source: Economic Times
