By Motilal Oswal Financial ServicesOption WritingSTRATEGY 1Writing against Cash / Fut HoldingSell KOTAK BANK 1720 CE 27-FEB-20 @ 13.25Target Level 0.05Stop Loss Level 19.50Gross Monthly Yield 1.35%ROI 5.10%Margin 1,02,000Days to Expiry 18Writing with HedgingLeg 1: Sell KOTAK BANK 1720 CE 27-FEB-20@ 13.25Leg 2: Buy KOTAK BANK 1800 CE 27-FEB-20@ 4.20Target Level 0.05Stop Loss (Spread) Level 13.50Gross Monthly Yield 0.9%ROI 3.50%Margin 1,00,000Days to Expiry 18STRATEGY 2Writing against Fut HoldingSell RELIANCE 1500 CE 27-FEB-20 @ 11.35Target Level 0.05Stop Loss Level 16.50Gross Monthly Yield 1.30%ROI 4.85%Margin 1,10,000Days to Expiry 18Writing with HedgingLeg 1: Sell RELIANCE 1500 CE 27-FEB-20 @ 11.35Leg 2: Buy RELIANCE 1600 CE 27-FEB-20 @ 2.60Target Level 0.05Stop Loss (Spread) Level 12.25Gross Monthly Yield 0.95%ROI 3.75%Margin 1,09,000Days to Expiry 18Pair TradingSTRATEGY 1Leg 1: BUY HDFCBANK 1 LOT 27-FEB-20@ 1242.50Leg 2 SELL HDFC 1 LOT 27-FEB-20 @ 2415Tenure 7-8 DaysTarget Profit 5.10%Stop Loss 2.50%Margin 2,16,000This pair has 90% correlation over the last few weeks post its ex-corporate action.
Pair (HDFC/ HDFCBANK) has trade lot ratio of 0.97 with price ratio of 1.94.
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 2Leg 1 BUY BAJFINANCE 1 LOT 27-FEB-20@ 4660.10 AND 8 SHARES IN CASHLeg 2 SELL BAJAJFINSV 1 LOT 27-FEB-20@ 9632.55Tenure 7-8 DaysTarget Profit 4.50%Stop Loss 2.30%Margin 4,56,000This pair has 85% correlation over the last one year.
Pair (BAJAJFINSV /BAJFINANCE) has trade lot ratio of 1.03 with price ratio of 2.06.
We are expecting the ratio to narrow down as per its 2SD band with the view to continue to outperformance of BAJFINANCE.