Infosys Sees Heavy Put Option Activity Amid Bearish Positioning Ahead of Year-End

Put Option Activity Highlights

Data from the derivatives market reveals that Infosys Ltd (INFY) recorded a substantial volume of put option contracts with the 1580 strike price expiring on 30 December 2025. A total of 6,647 contracts were traded, generating a turnover of approximately ₹4.81 crores. The open interest for these contracts stands at 2,829, indicating a significant build-up of positions that could influence price movements as expiry approaches.

The underlying stock price at the time of this activity was ₹1,595, placing the 1580 strike put options slightly out-of-the-money. This positioning suggests that investors are either hedging existing long positions or speculating on a potential downside move in the near term.

Stock Performance and Market Context

Infosys has experienced a mild decline over the past three trading sessions, with cumulative returns of -1.31% during this period. Despite this, the stock continues to trade above its 5-day, 20-day, 50-day, 100-day, and 200-day moving averages, reflecting a longer-term upward trend. The sector in which Infosys operates, Computers - Software & Consulting, has seen a 1-day return of -0.35%, while the broader Sensex index recorded a marginal gain of 0.03% on the same day.

Investor participation appears to be waning, as evidenced by a delivery volume of 35.92 lakh shares on 9 December, which is down by 44.35% compared to the 5-day average delivery volume. This decline in delivery volume may indicate reduced conviction among market participants or a wait-and-watch approach ahead of year-end.

Liquidity remains adequate for sizeable trades, with the stock’s traded value supporting transactions up to ₹34.12 crores based on 2% of the 5-day average traded value. This level of liquidity ensures that the put option activity is supported by a sufficiently active underlying market.

Interpreting the Put Option Interest

The concentration of put option contracts at the 1580 strike price, close to the current market price, indicates a strategic positioning by market participants. Put options serve as a tool for hedging against potential declines or for outright bearish bets. The sizeable open interest suggests that traders are preparing for possible volatility or downside risk in Infosys shares as the expiry date nears.

Given the stock’s recent three-day decline and the broader sector’s slight negative return, the put option activity may reflect cautious sentiment. However, the fact that Infosys remains above all major moving averages points to underlying resilience, which could limit the extent of any downward movement.

Expiry Patterns and Market Implications

The expiry date of 30 December 2025 is significant as it coincides with the end of the calendar year, a period often marked by portfolio rebalancing and risk management by institutional investors. The elevated put option volume at this expiry suggests that market participants are actively managing their exposure to Infosys ahead of this critical juncture.

Such activity can lead to increased volatility in the underlying stock as the expiry date approaches, especially if the stock price moves closer to the strike price of the put options. Traders and investors should monitor open interest and price action closely to gauge potential shifts in market sentiment.

Infosys Market Capitalisation and Sector Positioning

Infosys is classified as a Large Cap company with a market capitalisation of approximately ₹6,63,390 crores. Operating within the Computers - Software & Consulting industry, the company holds a prominent position in the sector, which is a key driver of technology and digital transformation in India.

The stock’s performance relative to its sector and the broader market provides important context for interpreting option market activity. While the sector has shown a slight negative return recently, Infosys’s ability to maintain levels above key moving averages may be a factor in the hedging strategies observed in the options market.

Investor Considerations and Outlook

For investors and traders, the heavy put option activity in Infosys warrants close attention. The positioning suggests a degree of caution or hedging against potential downside risks as the year-end approaches. However, the stock’s technical indicators, including its standing above multiple moving averages, imply that any correction may be contained within a broader uptrend.

Market participants should also consider the reduced delivery volume, which may reflect a temporary pause in strong buying interest. This dynamic, combined with the option market data, points to a nuanced market environment where risk management is paramount.

Monitoring the evolution of open interest and price movements in the coming weeks will be crucial for assessing whether the bearish sentiment embedded in the put options translates into actual price declines or remains a precautionary measure.

Conclusion

Infosys’s prominence in put option trading, particularly at the 1580 strike price with expiry at the end of December, highlights a strategic focus on risk mitigation and bearish positioning among investors. While the stock’s recent price action shows some softness, its technical strength and sector context provide a balanced perspective on its near-term prospects.

As the expiry date approaches, the interplay between option market activity and underlying stock performance will be a key factor for investors to watch, offering insights into market sentiment and potential price trajectories for this major technology player.

Only for Rs. 14,999 - Get Access to 2 Years + 6 Months of All Premium Features on MarketsMojo. As low as ₹500/month! Claim 83% OFF →