Future Perfect: Bet bull-call spread in PC Jeweller

The stock of PC Jeweller (₹365.6) was volatile and crashed on Friday with heavy volumes altering its short-term outlook to negative. The stock has an immediate support at ₹318 and a close below this could drag it towards ₹255. Only a close above ₹466 will change the outlook to positive for PC Jeweller. We expect the stock to remain volatile before taking a clear direction.

F&O pointers: The counter witnessed unwinding of 44 per cent or 76.87 lakh shares along with fall in share price. This signals negative. The sudden crash triggered activity across the strikes in options.

Strategy: Traders can consider a bull-call spread on PC Jeweller as we expect wild swing on the stock before settling for a direction. This can be engineered by buying ₹360-call and simultaneously selling the ₹370-call. They closed with a premium of ₹44 and ₹39.65 respectively. That means investors need to fork out ₹4.35/contract or ₹6,525, as the market lot is 1,500 shares per contract.

Maximum loss can be the premium paid, for which the stock has to fall below ₹360-call. A rise above ₹370 can help the position to garner a maximum profit of ₹8,475. Traders can consider exiting the position if the loss mounts to ₹4,500.

As the stock could be very volatile, traders can book profit as and when the opportunity arises.

Follow up: Hold Tata Motors positions.

 

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