Hindustan Aeronautics Ltd Sees Surge in Put Option Activity Amid Bearish Sentiment

Put Option Activity Highlights

Data from the derivatives market reveals that HAL’s put options have been the most actively traded contracts in recent sessions. The highest volume was recorded at the 4000 strike price, with 9,037 contracts changing hands, generating a turnover of ₹24.89 crores. This was closely followed by the 3,700 and 3,900 strike puts, with 4,618 and 4,545 contracts traded respectively. The 3,800 and 3,600 strike puts also saw substantial activity, with 4,296 and 3,841 contracts traded.

Open interest figures further underscore the bearish sentiment, with the 4,000 strike put holding an open interest of 4,006 contracts, the highest among all strikes. The 3,700 and 3,800 strike puts have open interest of 1,607 and 1,382 contracts respectively, indicating sustained investor interest in downside protection at these levels.

The underlying stock price stood at ₹3,982.20 on 5 February 2026, placing the 3,900 and 4,000 strike puts slightly out-of-the-money, while the 3,600 and 3,700 strikes are in-the-money or near-the-money, making these options attractive for hedging or speculative bearish bets.

Stock Performance and Market Context

HAL’s recent price action has been notably weak. The stock has declined by 5.63% in a single day, underperforming its aerospace and defence sector which fell 2.26%, and the Sensex which was down 0.47%. Over the last two trading days, HAL has lost 11.12% in value, reflecting growing investor caution. The stock opened with a gap down of 2.28% on 5 February and touched an intraday low of ₹3,970, down 5.86% from the previous close.

Technical indicators paint a bearish picture as well. HAL is trading below all key moving averages – 5-day, 20-day, 50-day, 100-day, and 200-day – signalling downward momentum. The weighted average price of traded volumes has been closer to the day’s low, suggesting selling pressure dominates.

Investor participation has risen sharply, with delivery volumes on 4 February reaching 27.63 lakh shares, a 228.72% increase over the five-day average. This heightened activity indicates that investors are either liquidating positions or repositioning amid uncertainty.

Liquidity remains robust, with the stock’s traded value supporting sizeable transactions up to ₹28.63 crores without significant market impact, making it a liquid large-cap stock for institutional and retail traders alike.

Investor Sentiment and Hedging Strategies

The surge in put option volumes and open interest at strike prices ranging from ₹3,600 to ₹4,000 suggests that market participants are positioning for a potential decline or are actively hedging existing long exposures. The 4,000 strike put, being slightly out-of-the-money, is particularly popular, indicating that traders expect the stock to test or breach this level before expiry.

Given HAL’s recent downgrade from a Sell to a Hold rating on 3 February 2026, with a Mojo Score of 50.0, investors appear cautious about the stock’s near-term prospects. The downgrade reflects concerns over valuation and sector headwinds, despite the company’s large-cap status and dominant position in aerospace and defence.

Market participants may be using put options as insurance against further downside, especially with the stock trading below all major moving averages and showing signs of technical weakness. The expiry date of 24 February 2026 is also significant, as it provides a near-term horizon for these bearish bets to play out.

It is worth noting that the turnover generated by put options at the 3,900 strike was ₹9.63 crores, and at 3,800 strike ₹6.62 crores, underscoring the strong interest in downside protection across multiple price levels. This layered approach to hedging is typical in volatile or uncertain market conditions.

Fundamental and Market Cap Considerations

HAL’s market capitalisation stands at ₹2,82,019 crores, categorising it as a large-cap stock with significant institutional ownership and analyst coverage. Despite the recent rating upgrade from Sell to Hold, the company’s Market Cap Grade remains at 1, indicating limited upside potential relative to its valuation.

The aerospace and defence sector itself has been under pressure, impacted by global geopolitical tensions and budgetary constraints affecting defence spending. HAL’s stock performance has mirrored these sectoral challenges, with the stock underperforming its peers and the broader market.

Investors should weigh the company’s strong market position and order book against near-term headwinds and technical weakness. The current put option activity suggests that many market participants are erring on the side of caution, favouring protective strategies over aggressive accumulation.

Outlook and Investor Takeaways

With the expiry of February options approaching, the elevated put option volumes and open interest at multiple strike prices highlight a cautious market stance on HAL. Investors should monitor price action closely around the ₹3,900 to ₹4,000 levels, as a breach below these could trigger further downside momentum.

For long-term investors, the recent downgrade to Hold and the stock’s technical weakness suggest a wait-and-watch approach may be prudent. Meanwhile, traders and portfolio managers may continue to use put options as a hedging tool to mitigate risk amid ongoing market volatility.

Given the stock’s liquidity and active options market, HAL remains a key focus for derivatives traders seeking to capitalise on directional moves or volatility spikes in the aerospace and defence sector.

In summary, the current options market activity around Hindustan Aeronautics Ltd reflects a growing bearish sentiment and a strategic shift towards risk management. Investors should balance fundamental strengths against technical signals and market dynamics before making allocation decisions.

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