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

Put Option Activity Highlights

On 23 February 2026, HAL emerged as the most active stock in put options trading, with 4,006 contracts exchanged at the ₹4,000 strike price for the expiry dated 24 February 2026. This volume translated into a turnover of approximately ₹72.71 lakhs, underscoring robust investor interest in downside protection. Open interest stood at 2,576 contracts, indicating sustained bearish bets or hedging positions carried over from prior sessions.

The underlying stock price at the time was ₹4,116, placing the ₹4,000 strike slightly out-of-the-money but close enough to be relevant for traders anticipating a near-term decline. The concentration of put activity at this strike suggests market participants are positioning for a potential correction or increased volatility in HAL’s shares.

Price Performance and Technical Weakness

HAL’s stock price has been under pressure, closing down 2.44% on the day and touching an intraday low of ₹4,056.1, a 2.73% decline from the previous close. This underperformance is notable against the Aerospace & Defense sector’s modest gain of 0.53% and the Sensex’s 0.64% rise on the same day, highlighting relative weakness.

Technically, HAL is trading below its key moving averages — 5-day, 20-day, 50-day, 100-day, and 200-day — signalling a bearish trend across multiple timeframes. Such a pattern often triggers protective put buying as investors seek to hedge against further downside risk.

Investor participation has also waned, with delivery volumes on 20 February falling by 36.24% to 3.68 lakh shares compared to the five-day average. This decline in delivery volume suggests reduced conviction among buyers, further supporting the case for increased hedging activity.

Fundamental and Market Context

HAL is a large-cap company with a market capitalisation of ₹2,75,869.69 crores, operating in the Aerospace & Defense industry. Despite its size and strategic importance, the company’s Mojo Score has deteriorated to 44.0, resulting in a downgrade from Hold to Sell on 9 February 2026. This downgrade reflects concerns over near-term earnings prospects, sector headwinds, and valuation pressures.

The company’s Market Cap Grade is rated 1, indicating limited upside potential relative to its peers. The downgrade and bearish technical signals have likely contributed to the increased put option interest as investors seek downside protection or speculate on further declines.

Expiry Patterns and Investor Behaviour

The expiry date of 24 February 2026 is critical, as it marks the near-term options expiry for HAL. The clustering of put contracts at the ₹4,000 strike price suggests that traders are focusing on this level as a key support or potential breach point. Should the stock close below this strike at expiry, these puts would become in-the-money, offering significant payoffs to holders.

Such concentrated put activity often signals either outright bearish bets or strategic hedging by institutional investors seeking to protect long stock positions from downside shocks. Given the stock’s recent underperformance and technical weakness, the latter scenario is plausible, especially in a volatile macroeconomic environment.

Comparative Sector and Market Performance

While HAL has declined by 1.08% over the last trading day, the Aerospace & Defense sector has gained 0.53%, and the broader Sensex index has risen 0.64%. This divergence highlights HAL’s relative weakness and may explain the heightened put option interest as investors reassess risk-reward dynamics within the sector.

Liquidity remains adequate for sizeable trades, with the stock’s average traded value supporting transactions up to ₹9.38 crores based on 2% of the five-day average. This liquidity facilitates active options trading and allows market participants to implement complex hedging or speculative strategies efficiently.

Investor Implications and Outlook

The pronounced put option activity in HAL signals a cautious or bearish stance among market participants. Investors holding the stock should consider the implications of the technical breakdown and the recent downgrade in Mojo Grade. Protective strategies such as buying puts or employing collars may be prudent to mitigate downside risk.

Conversely, speculative traders might view the elevated put volumes as an opportunity to capitalise on potential volatility around the 24 February expiry. Monitoring open interest changes and price action near the ₹4,000 strike will be crucial in gauging market sentiment and potential price direction.

Long-term investors should weigh the company’s fundamental challenges against its strategic importance in the Aerospace & Defense sector. While the current environment appears challenging, any positive developments in order inflows or government contracts could reverse the bearish trend.

Conclusion

Hindustan Aeronautics Ltd’s recent surge in put option trading at the ₹4,000 strike price ahead of the 24 February expiry reflects growing bearish sentiment and hedging activity. The stock’s underperformance relative to its sector and the broader market, combined with technical weakness and a recent downgrade, has prompted investors to seek downside protection. Market participants should closely monitor price movements and options open interest to navigate the evolving risk landscape effectively.

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