The immediate outlook for Reliance Communications (₹53) is neutral. The stock may move within a range of ₹47-56 in the next few days. Only a conclusive close above ₹59.5 will alter the short-term outlook to positive. In such an event, the stock can rise to ₹67 and then to ₹79. If it fails to sustain its recent gains, it can attempt to breach an all-time low of ₹45.5 it registered in August last.

F&O pointers: The Reliance Communications April futures saw just a marginal accumulation of open interest, indicating that traders are still cautious. Option trading indicates that the stock may face strong resistance around ₹55.

Strategy: Traders can consider a bull-call spread on Reliance Communications. This can be initiated by selling 55-April Call and simultaneously buying the 52.50-April call. The two closed with premiums of ₹2.30 and ₹1.35, respectively.

So, traders have to incur an initial cost of ₹0.95 a contract. As the market lot is 8,000 shares per contract, the maximum loss could be ₹7,600 (the total premium paid). For that to happen, RCom has to close at or below ₹52.5 at the time of expiry. On the other hand, if the stock closes above ₹55 at the time of expiry, the contract can deliver a profit of ₹12,400 (or ₹1.55/contract).

As RCom is a very volatile counter, this strategy is for traders who can withstand the wild swings in the stock. Those who cannot stomach such risk can buy ₹55 April-call at ₹2.30 with a stop loss at ₹1.75 and book profits at ₹5.

Follow-up: We had advised traders to buy a long call on Axis Bank. Those who are holding the options can book profit.

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