HDFC Bank Sees Heavy Put Option Activity Amid Narrow Trading Range

Put Option Activity Highlights

On 10 December 2025, HDFC Bank's put options with a strike price of ₹1,000 and expiry date of 30 December 2025 emerged as the most actively traded contracts. A total of 6,201 contracts exchanged hands, generating a turnover of approximately ₹499.99 lakhs. Open interest in these contracts stands at 6,555, signalling sustained interest in downside protection or speculative bearish bets.

The underlying stock price at the time was ₹990, placing the ₹1,000 strike slightly out-of-the-money. This positioning suggests that market participants are either hedging against a potential decline below this level or speculating on a near-term correction. The concentration of activity in this strike price and expiry date highlights a focal point for market sentiment as the month-end approaches.

Price Movement and Market Context

HDFC Bank's share price has been trading within a narrow band of ₹8.5 over the last few days, reflecting subdued volatility. The stock closed at ₹990, which is approximately 3.05% away from its 52-week high of ₹1,020.5. Despite this proximity to the peak, the stock has recorded a consecutive three-day decline, with cumulative returns of -1.3% during this period.

In comparison, the private sector banking sector has shown a slightly less negative one-day return of -0.44%, while the broader Sensex index posted a marginal gain of 0.03% on the same day. This relative underperformance may be contributing to the cautious stance observed in the options market.

Technical Indicators and Investor Participation

From a technical perspective, HDFC Bank's price remains above its 50-day, 100-day, and 200-day moving averages, indicating a longer-term uptrend. However, it is trading below its 5-day and 20-day moving averages, which may reflect short-term pressure or consolidation.

Investor participation has shown signs of moderation, with delivery volumes on 9 December recorded at 90.77 lakh shares, representing a decline of 19.36% compared to the five-day average delivery volume. This reduction in delivery volume suggests a cautious approach by investors amid recent price fluctuations.

Liquidity remains adequate, with the stock's traded value supporting trade sizes up to ₹29.58 crore based on 2% of the five-day average traded value. This level of liquidity facilitates active trading and efficient price discovery in both the cash and derivatives markets.

Bearish Positioning and Hedging Implications

The prominence of put option activity at the ₹1,000 strike price suggests a strategic focus on downside risk management. Investors may be employing these options as a hedge against potential declines in the underlying stock, especially given the recent three-day losing streak and the stock's failure to sustain momentum above short-term moving averages.

Alternatively, some market participants could be positioning for a near-term correction, anticipating that the stock might test lower support levels before the expiry date. The open interest data supports this view, as the accumulation of contracts indicates a build-up of bearish sentiment or protective measures.

Expiry Patterns and Market Sentiment

The expiry date of 30 December 2025 is the final trading day for these options, making the coming weeks critical for price action. The concentration of put contracts with this expiry highlights the importance of monitoring price movements as the month-end approaches. Any significant deviation below the ₹1,000 strike could trigger increased option exercise or adjustments in hedging strategies.

Given the stock's proximity to its 52-week high and the recent price consolidation, the market appears to be balancing optimism about the bank's fundamentals with caution over short-term volatility. This dynamic is reflected in the options market's activity, where protective puts are sought to mitigate downside risks.

Market Capitalisation and Sector Position

HDFC Bank is classified as a large-cap stock with a market capitalisation of approximately ₹15,34,713 crore. It operates within the private sector banking industry, a key segment of the Indian financial services sector. The bank's size and sector affiliation contribute to its liquidity and the active participation it commands in both cash and derivatives markets.

Its performance relative to the sector and broader indices is closely watched by investors, with recent assessment changes influencing market sentiment and trading behaviour.

Outlook for Investors

Investors tracking HDFC Bank should closely monitor the stock’s price action in the coming days, particularly in relation to the ₹1,000 strike price level. The active put option interest signals a market expectation of potential volatility or downside risk, which may influence trading strategies and portfolio hedging decisions.

Given the bank’s large-cap status and sector leadership, its price movements often serve as a barometer for private sector banking sentiment in India. The interplay between technical indicators, delivery volumes, and options market activity provides a comprehensive picture of current market dynamics.

While the stock remains near its yearly highs, the recent short-term weakness and put option interest suggest that investors are adopting a cautious stance, balancing optimism with prudent risk management.

Conclusion

HDFC Bank’s options market activity, particularly the surge in put contracts at the ₹1,000 strike expiring on 30 December 2025, reflects a nuanced market view. Investors appear to be hedging against potential downside or positioning for a correction amid a narrow trading range and recent price declines. The bank’s strong market capitalisation and sector prominence continue to support liquidity and active participation, making it a key stock to watch as expiry approaches.

Market participants should remain attentive to evolving price trends and volume patterns, as these will provide further clues on the bank’s near-term trajectory and investor sentiment.

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