Hindustan Aeronautics Ltd Sees Heavy Call Option Activity Amid Bearish Price Action

Call Option Activity Highlights

On 4 February 2026, HAL recorded the highest call option volumes among its peers, with two strike prices dominating the activity for the 24 February 2026 expiry. The 4,300 strike call saw 4,708 contracts traded, generating a turnover of ₹829.43 lakhs and an open interest of 2,272 contracts. Meanwhile, the 4,500 strike call recorded 4,520 contracts traded, with a turnover of ₹418.26 lakhs and an open interest of 3,602 contracts. These figures indicate a strong speculative interest in the stock’s potential upside, with traders positioning for a rally beyond the current underlying value of ₹4,216.80.

The concentration of open interest at these strike prices suggests that market participants are anticipating a rebound or a significant price move above ₹4,300 and possibly towards ₹4,500 by the expiry date. However, the disparity between the bullish option positioning and the stock’s recent price performance warrants a closer examination.

Price Performance and Technical Context

HAL’s stock price has been under pressure, declining by 6.00% on the day, significantly underperforming the aerospace and defence sector, which was up by 0.12%, and the broader Sensex, which gained 0.23%. The stock touched an intraday low of ₹4,097.60, down 8.34% from previous levels, and traded mostly near its low price, as indicated by the weighted average price data.

Technically, HAL is trading below all major moving averages — 5-day, 20-day, 50-day, 100-day, and 200-day — signalling a bearish trend across multiple time frames. This technical weakness contrasts with the heavy call option activity, suggesting that while some investors are betting on a recovery, the broader market sentiment remains cautious or negative.

Investor participation has also declined, with delivery volumes falling by 3.58% against the five-day average, indicating reduced conviction among long-term holders. Despite this, liquidity remains adequate, with the stock able to support trade sizes of up to ₹21.55 crores based on 2% of the five-day average traded value, ensuring that active traders can enter or exit positions without significant price impact.

Fundamental and Market Positioning

HAL operates in the aerospace and defence sector, a strategically important industry with significant government contracts and long-term growth potential. The company’s market capitalisation stands at ₹2,99,073 crores, classifying it as a large-cap stock. Despite this, its current Mojo Score is 50.0 with a Mojo Grade of Hold, upgraded from Sell on 3 February 2026, reflecting a cautious outlook by analysts.

The upgrade in rating suggests that while the stock has faced recent headwinds, there is potential for stabilisation or recovery. However, the low Market Cap Grade of 1 indicates limited upside relative to its size and valuation metrics. Investors should weigh these factors carefully, especially given the divergence between option market optimism and the stock’s technical weakness.

Expiry Patterns and Investor Sentiment

The expiry date of 24 February 2026 is attracting significant attention, with traders accumulating call options at strike prices well above the current market price. This pattern often reflects speculative positioning or hedging strategies by institutional investors expecting positive developments or sectoral tailwinds in the near term.

However, the heavy turnover and open interest at these strikes also increase the risk of volatility around expiry, as traders adjust or unwind positions. The contrast between the bearish price trend and bullish option activity may indicate a market in flux, with uncertainty about the timing and magnitude of any recovery.

Implications for Investors

For investors, the current scenario presents a nuanced picture. The strong call option activity signals that some market participants are betting on a rebound, possibly driven by expectations of new contracts, government orders, or sectoral recovery. Yet, the underlying stock’s weak technicals and falling investor participation caution against aggressive long positions at this stage.

Those considering exposure to HAL should monitor price action closely, particularly around the 4,300 to 4,500 levels, which are critical for option expiry dynamics. Risk management is essential, given the potential for sharp moves in either direction as expiry approaches.

Sector and Broader Market Context

The aerospace and defence sector has been under pressure recently due to geopolitical uncertainties and budgetary constraints. HAL’s underperformance relative to its sector peers and the Sensex highlights the challenges faced by the company in maintaining investor confidence.

Nevertheless, the sector remains strategically vital, and government initiatives to boost indigenous defence manufacturing could provide a catalyst for recovery. Investors should keep an eye on policy developments and contract announcements that could influence HAL’s outlook.

Conclusion

Hindustan Aeronautics Ltd’s heavy call option activity ahead of the 24 February expiry reflects a segment of the market positioning for a bullish outcome despite the stock’s recent weakness. The divergence between derivatives market optimism and the underlying price action underscores the importance of a cautious, well-informed approach.

With a Hold rating and a Mojo Score of 50.0, HAL remains a stock to watch rather than a clear buy. Investors should balance the speculative interest in call options with the technical and fundamental realities, considering alternative opportunities where appropriate.

As expiry approaches, volatility is likely to increase, offering both risks and opportunities for traders and investors alike.

Unlock special upgrade rates for a limited period. Start Saving Now →