HDFC Bank Sees Heavy Put Option Activity Amid Bearish Sentiment

Put Option Activity Highlights

On 6 February 2026, HDFC Bank’s put options with a strike price of ₹950 and expiry on 24 February 2026 emerged as the most actively traded contracts in the market. A total of 5,602 contracts changed hands, generating a turnover of approximately ₹4.59 crores. Open interest for these puts stands at 5,347 contracts, indicating sustained investor interest in downside protection or speculative bearish bets.

The underlying stock price at the time was ₹941.7, slightly below the put strike price, which suggests that traders are positioning for further downside or seeking to hedge existing long exposures. The concentration of activity at this strike price and expiry date points to a near-term focus on potential price corrections or volatility spikes.

Stock Performance and Technical Context

HDFC Bank’s stock has underperformed its sector peers, declining by 0.89% on the day and lagging the private sector banking sector by 0.87%. The stock has recorded a consecutive two-day fall, losing 1.15% over this period. Despite trading within a narrow range of ₹7.8, the price remains below its 50-day, 100-day, and 200-day moving averages, signalling a medium- to long-term bearish technical setup.

Investor participation has also waned, with delivery volume on 5 February falling by 3.84% compared to the five-day average, suggesting reduced conviction among buyers. Liquidity remains adequate, with the stock’s traded value supporting sizeable trades up to ₹56.09 crores, ensuring that option market activity is backed by sufficient underlying market depth.

Investor Sentiment and Market Implications

The heightened put option activity at the ₹950 strike price, just above the current market price, suggests that investors are either hedging against further declines or speculating on a near-term correction. This strike price acts as a psychological support level, and the volume of puts traded indicates a significant interest in downside protection.

Given the stock’s recent underperformance relative to the Sensex and its sector, alongside weakening technical indicators, the market appears to be pricing in increased risk. The Mojo Score for HDFC Bank stands at 54.0, reflecting a Hold rating, which was upgraded from Sell on 3 February 2026. This upgrade indicates some improvement in fundamentals or sentiment, but the overall grade remains cautious.

Market participants should note that the bank’s large market capitalisation of ₹14,54,251 crores and its status as a large-cap stock typically confer stability. However, the current option market behaviour signals that investors are preparing for potential volatility or downside risks in the near term.

Expiry Patterns and Strategic Positioning

The expiry date of 24 February 2026 is less than three weeks away, which intensifies the focus on short-term price movements. The concentration of open interest and trading volume in puts expiring on this date suggests that traders are positioning for events or market developments expected within this timeframe.

Such activity often precedes earnings announcements, macroeconomic data releases, or sector-specific news that could impact banking stocks. Investors and traders should monitor upcoming corporate disclosures and economic indicators closely to gauge potential catalysts for price movement.

Moreover, the put option activity may also reflect hedging by institutional investors seeking to protect gains or limit losses amid uncertain market conditions. This defensive posture is consistent with the stock’s recent technical weakness and subdued investor participation.

Comparative Analysis and Outlook

When compared with the broader Sensex, which declined marginally by 0.02% on the same day, HDFC Bank’s 0.75% drop highlights relative weakness. The private sector banking sector itself posted a modest gain of 0.09%, underscoring that HDFC Bank’s underperformance is more stock-specific than sector-driven.

Investors should consider the bank’s current technical positioning: trading above its 5-day and 20-day moving averages but below longer-term averages suggests a mixed trend with potential for either consolidation or further correction. The falling delivery volumes and reduced investor participation add to the cautious outlook.

Given these factors, the surge in put option activity can be interpreted as a prudent risk management measure by market participants. While the Mojo Grade remains at Hold, the recent upgrade from Sell indicates that the bank’s fundamentals may be stabilising, though not yet strong enough to warrant a bullish stance.

For investors, this environment calls for careful monitoring of price action and option market signals, with an emphasis on risk mitigation strategies. The near-term expiry of the active put options also suggests that volatility could increase as the date approaches, providing both opportunities and challenges for traders.

Conclusion

HDFC Bank Ltd.’s recent surge in put option trading at the ₹950 strike price expiring on 24 February 2026 reflects a growing bearish sentiment and a cautious stance among investors. The stock’s underperformance relative to its sector and the broader market, combined with technical weaknesses and declining investor participation, underpin this trend.

While the bank’s fundamentals show signs of stabilisation, as evidenced by the Mojo Score upgrade to Hold, the option market activity highlights the importance of hedging and risk management in the current environment. Investors should remain vigilant to upcoming market catalysts and price movements, using option market data as a valuable tool for gauging sentiment and positioning.

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