Rs 1,000 Puts Draw 5,870 Contracts on Infosys Ltd Ahead of 27 Oct Expiry

Put Options Event and Cash Market Context

On 5 October, Infosys Ltd saw a total of 15,755 put contracts traded across four key strikes expiring on 27 October. The heaviest volume was at the Rs 1,000 strike with 5,870 contracts, followed by Rs 1,020 (4,290 contracts), Rs 1,040 (3,093 contracts), and Rs 980 (2,502 contracts). The combined turnover for these puts exceeded ₹1,845 lakhs, reflecting significant premium flow into downside protection.

The stock closed marginally lower by 0.12% on the day, underperforming its sector by 1.54%, and remains about 4.89% above its 52-week low of Rs 980.40. Notably, Infosys Ltd has been trading in a narrow range recently, with the weighted average price skewed towards the lower end of the day’s band, indicating some selling pressure despite the overall sideways trend. Is this subtle weakness signalling a shift in sentiment or merely a pause in the rally?

Strike Price Analysis: Moneyness and Intent

The Rs 1,000 put strike is approximately 3.5% below the current market price of Rs 1,036.70, placing it out-of-the-money (OTM). The Rs 1,020 and Rs 1,040 strikes are closer to at-the-money (ATM) territory, with Rs 1,040 slightly in-the-money (ITM) given the underlying price. The Rs 980 strike is further OTM, about 5.5% below the current price.

OTM puts like the Rs 1,000 strike often serve as protective hedges for existing long positions, especially when the stock is trading above short-term moving averages. In this case, Infosys Ltd is trading above its 5-day moving average but below its 20-day and 50-day averages, suggesting a technical setup where investors might seek downside protection against a pullback to support zones. Could this put activity be a strategic hedge rather than outright bearish positioning?

Interpreting the Put Activity: Hedging, Bearish Bets, or Put Writing?

Put options inherently carry ambiguous signals. The heavy volume at OTM strikes like Rs 1,000 and Rs 980, combined with the stock’s modest decline and technical positioning, leans towards hedging rather than directional bearish bets. If these were purely bearish bets, one would expect more activity at ATM or ITM strikes during a downtrend, which is not the case here.

Alternatively, put writing—selling puts to collect premium—could be at play, especially given the sizeable open interest at Rs 1,000 (9,364 contracts) and Rs 1,020 (5,113 contracts). Put sellers typically anticipate the stock will remain above the strike price, profiting if the puts expire worthless. However, the fresh volume at Rs 1,000 (5,870 contracts traded) against open interest suggests a mix of new buying and selling, complicating a straightforward put writing narrative.

Open Interest and Contracts Analysis

The open interest (OI) at the Rs 1,000 strike stands at 9,364 contracts, with 5,870 contracts traded on the day, indicating significant fresh positioning. The ratio of traded contracts to OI is approximately 0.63, signalling active turnover but not an overwhelming surge that would imply a sudden shift in sentiment. The Rs 1,020 strike shows 4,290 contracts traded against 5,113 OI, a higher turnover ratio, suggesting more recent interest at this strike.

Lower OI at the Rs 980 strike (3,033 contracts) despite 2,502 contracts traded indicates fresh activity here as well, possibly speculative or protective. The Rs 1,040 strike, slightly ITM, has the highest premium turnover but moderate OI, which may reflect some directional bearish bets or spread strategies.

Cash Market Context: Technicals and Delivery Volumes

Infosys Ltd is positioned above its 5-day moving average but remains below the 20-day, 50-day, 100-day, and 200-day averages, indicating a short-term uptrend within a longer-term consolidation or downtrend. This mixed technical picture supports the idea that put buyers may be seeking protection against a near-term pullback rather than betting on a sustained decline.

Delivery volumes on 1 October rose by 41.42% to 88.88 lakh shares, signalling increased investor participation. However, the weighted average price skewed towards the day’s low suggests some selling pressure. This combination of rising delivery volume but price weakness may explain why investors are hedging with puts — should investors interpret this as caution or a temporary pause?

Conclusion: Protective Hedging Dominates Put Activity

The put option activity in Infosys Ltd ahead of the 27 October expiry reveals a complex picture. The concentration of contracts at OTM strikes, combined with the stock’s technical positioning and modest price decline, suggests that much of the put buying is likely protective hedging rather than outright bearish speculation.

While put writing may also be present, the fresh volume and open interest ratios indicate a balanced mix of strategies. Investors appear to be managing risk amid a narrow trading range and mixed technical signals, rather than positioning for a sharp downturn.

With puts active and calls also seeing volume, how should investors interpret the options market’s message for Infosys Ltd?

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