HDFC Bank Sees Heavy Put Option Activity Amid Bearish Sentiment

Put Option Activity Highlights

On 5 February 2026, HDFC Bank’s put options with a strike price of ₹950 expiring on 24 February 2026 emerged as the most actively traded contracts in the segment. A total of 2,999 contracts changed hands, generating a turnover of approximately ₹21.51 crores. The open interest for these puts stands at 4,729 contracts, indicating a substantial build-up of bearish positions or protective hedges against potential price declines.

The underlying stock price hovered near ₹949.35, just below the ₹950 strike, which is a critical psychological and technical level. This proximity suggests that traders are positioning themselves for a possible downward move or at least seeking insurance against volatility in the near term.

Price and Trend Analysis

HDFC Bank’s stock price movement on 5 February was inline with the broader private sector banking sector, which itself declined by 0.37% while the Sensex fell 0.47%. The bank’s share price slipped by 0.33%, reflecting a mild bearish sentiment. Notably, the stock reversed its upward momentum after three consecutive days of gains, trading within a narrow range of ₹7.95, signalling indecision among investors.

Technical indicators reveal a mixed picture. The stock price remains above its 5-day and 20-day moving averages but continues to trade below the longer-term 50-day, 100-day, and 200-day moving averages. This suggests that while short-term momentum has been positive, the medium to long-term trend remains under pressure.

Investor participation has also waned, with delivery volumes on 4 February falling by 24.07% compared to the five-day average, indicating reduced conviction in the recent price moves. However, liquidity remains robust, with the stock’s traded value supporting sizeable trade sizes up to ₹55.38 crores, ensuring ease of entry and exit for market participants.

Investor Sentiment and Hedging Implications

The heightened put option activity at the ₹950 strike price suggests that investors are either hedging existing long positions or speculating on a potential price correction. Given the stock’s current trading just below this strike, these puts offer a near-the-money protection level, which is often favoured by traders seeking downside insurance without paying excessive premiums.

HDFC Bank’s Mojo Score currently stands at 54.0 with a Mojo Grade of Hold, upgraded from a Sell rating on 3 February 2026. This upgrade reflects a cautious optimism but also acknowledges the stock’s ongoing challenges amid a volatile banking sector environment. The bank’s market capitalisation remains substantial at ₹14,61,791.14 crores, categorising it firmly as a large-cap stock with significant institutional interest.

While the recent downgrade reversal is encouraging, the presence of heavy put option volumes indicates that market participants remain wary of near-term risks, possibly due to macroeconomic uncertainties or sector-specific headwinds such as credit growth concerns or regulatory developments.

Expiry Patterns and Market Impact

The 24 February 2026 expiry date is attracting considerable attention, with the ₹950 strike price acting as a focal point for option traders. Open interest accumulation at this strike suggests that the market is bracing for potential volatility around this level. Should the stock breach this strike decisively, it could trigger further downside momentum as put holders exercise or unwind positions.

Conversely, if the stock stabilises above ₹950, these put options may expire worthless, providing relief to bullish investors and potentially triggering short-covering rallies. The interplay between spot price movements and option expiry dynamics will be critical to watch in the coming weeks.

Comparative Sector and Market Context

Within the private sector banking industry, HDFC Bank’s recent performance is broadly in line with sectoral trends, which have been subdued amid tightening monetary policy and cautious credit demand. The Sensex’s 0.47% decline on the same day underscores a risk-off mood in the broader market, further justifying the increased demand for downside protection instruments such as put options.

Investors should also consider the bank’s liquidity profile and delivery volumes, which, despite a recent dip, remain adequate to support active trading and position adjustments. The stock’s ability to maintain trading volumes above ₹55 crores in value terms ensures that option market signals are reflective of genuine investor sentiment rather than illiquidity distortions.

Outlook and Strategic Considerations

For investors and traders, the current surge in put option activity at the ₹950 strike price offers a valuable insight into market expectations. Those holding long positions in HDFC Bank may consider protective strategies such as buying puts or tightening stop-loss levels to mitigate downside risk. Conversely, contrarian investors might view the elevated put volumes as a potential contrarian indicator, signalling oversold conditions if accompanied by stabilising price action.

Given the bank’s recent upgrade to a Hold rating and its sizeable market capitalisation, it remains a key bellwether for the private banking sector. Monitoring option expiry dynamics and open interest changes will be crucial for anticipating near-term price movements and adjusting portfolios accordingly.

Conclusion

HDFC Bank Ltd.’s pronounced put option activity ahead of the 24 February expiry highlights a cautious market stance amid mixed technical signals and sectoral headwinds. While the stock’s recent upgrade to Hold suggests some improvement in fundamentals, the substantial open interest in near-the-money puts reflects ongoing investor hedging and bearish positioning. Market participants should closely monitor price action around the ₹950 strike and expiry developments to navigate the evolving risk landscape effectively.

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