After a drastic fall last week, the outlook for the stock of Polycab India (₹3,980.90) has turned negative. Notwithstanding a recovery on Friday, the outlook remains bearish.

Immediate support is at ₹3,614. A close below this can trigger further downside. A major support is at ₹3,374. The nearest resistance is at ₹4,588. We expect the stock to remain volatile with downward bias.

F&O pointers: Polycab India’s January futures closed at ₹3,983.10 against the spot price of ₹3,980.90. The counter witnessed a strong rise in open interest when the stock crashed.

Strategy: Sell 4,400-call on Polycab India that closed with a premium of ₹50.85. This strategy is very risky on two counts — Polycab is one of the highly volatile counters and profit is limited. Besides, selling options requires higher margin commitments and hence vigilant tracking is needed. So, the strategy is strictly for traders with higher risk appetite.

The maximum profit is the premium received, which is ₹5,085 (100 shares/market lot) and that will happen if the stock remains below ₹4,400. But theoretically, the loss can be unlimited if the stock rises sharply. The break-even point is ₹4,450.

This trade can be reviewed next week, which is also the settlement week.

Follow-up: Bajaj Finance moved on expected lines. Traders who are still holding can exit.

Note: The recommendations are based on technical analysis and F&O positions. There is a risk of loss in trading