Rs 1,060 Puts — 7% Below Current Price — Draw 1,591 Contracts on Infosys Ltd

Put Options Event and Cash Market Context

On 28 August, Infosys Ltd saw a total of 10,861 put contracts traded across five key strikes ranging from Rs 1,060 to Rs 1,140. The Rs 1,140 strike led with 2,909 contracts, followed by Rs 1,100 with 2,415 contracts, and Rs 1,120 with 2,029 contracts. The combined turnover for these put trades exceeded ₹831 lakhs, reflecting significant premium flow into downside protection. Meanwhile, the stock itself gained 2.92% on the day, outperforming the Sensex's 0.28% rise but slightly underperforming its sector's 2.98% advance.

This juxtaposition of rising stock price and heavy put activity raises the question: is this put buying a sign of hedging or a bearish bet? The answer lies in the strike price analysis and open interest patterns.

Strike Price Analysis: Moneyness and Intent

The put strikes cluster mostly below the current price of Rs 1,141.6, with Rs 1,060 puts approximately 7% out-of-the-money (OTM), Rs 1,080 puts 5.4% OTM, Rs 1,100 puts 3.6% OTM, and Rs 1,120 puts 1.9% OTM. The Rs 1,140 strike is nearly at-the-money (ATM), just 0.2% below the underlying. This distribution suggests a layered approach to downside protection, with the bulk of activity concentrated in strikes that provide a buffer zone rather than immediate downside exposure.

OTM puts, especially those 5-7% below the current price, are often purchased as insurance against a pullback rather than outright bearish bets. The Rs 1,060 strike's 1,591 contracts represent a sizeable position but remain a safety net rather than a directional wager expecting a sharp decline. Conversely, the ATM Rs 1,140 puts with 2,909 contracts could indicate some hedging closer to the money, but the overall pattern leans towards protective positioning.

Interpreting the Put Activity: Hedging, Bearishness, or Put Writing?

Put option activity can signal multiple strategies. First, outright bearish positioning would typically involve ATM or in-the-money (ITM) puts bought on a falling stock. However, Infosys Ltd is on an upward trajectory, having gained 2.92% on the day and showing a trend reversal after two days of decline. This context suggests that the put buying is less likely to be purely bearish speculation.

Second, hedging of existing long positions is a plausible explanation. The stock trades above its 5-day and 50-day moving averages but remains below the 20-day, 100-day, and 200-day averages, indicating mixed technical signals. The Rs 1,060 to Rs 1,120 put strikes roughly correspond to support zones near the 50-day moving average, consistent with investors seeking to protect gains from a recent rally without exiting positions.

Third, put writing or selling as a bullish bet is less evident here. The open interest (OI) figures for these strikes are substantial but not disproportionately higher than contracts traded, implying fresh buying rather than premium collection. For example, the Rs 1,100 strike shows 2,415 contracts traded against an OI of 5,495, a ratio suggesting active new positions rather than predominantly put writing.

Open Interest and Contracts: Fresh Positioning Insights

The open interest data reveals that the Rs 1,100 put strike holds the highest OI at 5,495 contracts, followed by Rs 1,140 at 3,427 and Rs 1,120 at 2,759. The ratio of contracts traded to OI varies from approximately 0.3 to 0.7 across strikes, indicating a mix of fresh buying and position adjustments. The Rs 1,060 strike, with 1,591 contracts traded and 1,952 OI, shows a ratio of about 0.8, suggesting significant new activity at this deeper OTM level.

This pattern supports the interpretation that investors are layering their hedges, buying puts at various strikes to protect against different levels of downside risk. The absence of a large disproportionate increase in OI relative to traded contracts also reduces the likelihood of widespread put writing, which would typically manifest as high OI with relatively low new contracts.

Cash Market Momentum and Technical Alignment

Infosys Ltd has shown a modest recovery after two days of decline, with a 2.92% gain on 28 August and an opening gap up of 2.79%. The stock trades above its 5-day and 50-day moving averages but remains below the 20-day, 100-day, and 200-day averages, reflecting a cautious but positive short-term trend. Delivery volumes have declined by 8.57% against the five-day average, indicating lower investor participation in the rally. This thinning delivery volume may be prompting investors to hedge their positions with puts, as the rally lacks strong delivery-backed conviction — should investors consider similar protective strategies?

Delivery Volume and Market Participation

The delivery volume on 27 August stood at 40.64 lakh shares, down 8.57% from the five-day average, suggesting that the recent price gains are not fully supported by robust investor participation. This scenario often leads to increased hedging activity as investors seek to safeguard profits against a potential pullback. The put option activity at multiple strikes below the current price aligns with this cautious stance, reinforcing the protective rather than purely bearish interpretation.

Conclusion: Protective Hedging Dominates Put Activity

The heavy put option activity in Infosys Ltd ahead of the 29 September expiry is best understood as a protective measure rather than a directional bearish bet. The concentration of contracts at out-of-the-money strikes 3.6% to 7% below the current price, combined with the stock's recent upward momentum and mixed technical signals, points to investors hedging existing long positions against a potential pullback.

While some put buying at near-the-money strikes could reflect cautious sentiment, the overall pattern does not support widespread put writing or aggressive bearish positioning. The declining delivery volumes amid the rally further reinforce the rationale for hedging rather than outright selling. Given this nuanced picture, should investors consider protective puts as part of their risk management strategy in Infosys Ltd?

Key Data at a Glance

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