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The stock of PC Jeweller gained strongly on Friday with heavy volumes. Thanks to sharp gains, the short-term outlook for PC Jeweller has turned positive. However, being a highly volatile stock, it could swing wildly without giving any escape route for traders.
The stock finds immediate support at ₹63 and a close below that could change the short-term outlook to negative. Immediate resistance appears at ₹91 and a close above ₹105 will change the medium-term outlook to positive.
F&O pointers: Despite the strong gain by the underlying, PC Jeweller December futures shed 14.88 lakh shares or 17 per cent. This indicates that traders prefer to book profits rather than hold positions, as they are not sure of the sustainability of this rally.
Strategy: Traders can consider buying PC Jeweller ₹80-call, which closed with a premium of ₹7.65. As the market lot is 1,500 share per contract, the total outgo works out to ₹11,475.
The maximum loss could be the premium paid (that is, ₹11,475), if the stock fails to hold above ₹80 at the time of expiry. However, profit potential is high if the stock surges sharply within this expiry.
Traders can exit if the premium of the option rises to ₹17 or falls to ₹2.5. Alternatively, traders with a high-risk appetite can consider going long with a stop-loss at ₹75.
Follow up: Though the stock gained last week, investors can exit Zee Entertainment position as the time value will hurt the position.
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