Rs 1,040 and Rs 1,050 Puts Draw Heavy Interest on Infosys Ltd Ahead of 28 July Expiry

Put Options Event and Cash Market Context

On 9 July, the put options at Rs 1,040 and Rs 1,050 strikes for the 28 July expiry saw 2,564 and 2,707 contracts traded respectively, generating a combined turnover of approximately ₹709 crores. The underlying stock price closed at Rs 1,047, slightly below the Rs 1,050 strike and just above Rs 1,040, which places these puts at-the-money (ATM) and just out-of-the-money (OTM) respectively. The open interest for these strikes stands at 4,438 and 4,924 contracts, indicating a substantial build-up of positions ahead of expiry.

This activity coincides with a 1.85% decline in the stock price on the day, following two consecutive days of losses totalling 2.24%. The stock has underperformed its sector by 1.09% and the broader Sensex has gained 0.66% on the same day, highlighting a relative weakness in Infosys Ltd. The stock currently trades above its 5-day moving average but remains below its 20-day, 50-day, 100-day, and 200-day moving averages, suggesting a mixed technical picture.

Strike Price Analysis: Moneyness and Intent

The Rs 1,050 strike sits just 0.3% above the current market price, effectively ATM, while the Rs 1,040 strike is approximately 0.7% below the underlying price, making it slightly in-the-money (ITM). This proximity to the current price is critical in interpreting the put activity. ATM and ITM puts typically carry higher premiums and are more likely to be used for directional bearish bets or protective hedges rather than speculative put writing, which usually involves OTM strikes further from the current price.

Given the stock's recent decline and the strike prices involved, the put activity could reflect a cautious stance among traders anticipating further downside or protecting gains from recent rallies. However, the relatively modest distance from the underlying price suggests the activity is less likely to be aggressive bearish speculation and more aligned with risk management strategies.

Infosys Ltd's put options activity raises the question: is this a sign of protective hedging or a directional bearish bet?

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

Put options inherently carry ambiguous signals. The heavy volume at ATM and slightly ITM strikes on a stock that has recently declined suggests two main interpretations. First, the activity could represent fresh bearish positioning, with traders buying puts to profit from further declines. Second, it could be protective hedging by existing long holders seeking to limit downside risk amid recent volatility.

Put writing, or selling puts to collect premium as a bullish bet, is less likely here given the strike proximity and the stock's recent weakness. Put writers typically prefer OTM strikes to maximise premium while minimising risk of assignment. The Rs 1,040 and Rs 1,050 strikes do not fit this profile well.

Moreover, the open interest levels relative to contracts traded indicate a moderate build-up rather than a complete overhaul of positions. The ratio of contracts traded to open interest is roughly 0.58 for Rs 1,040 and 0.55 for Rs 1,050, suggesting a mix of fresh buying and adjustments to existing positions rather than purely new speculative bets.

Open Interest and Contracts Analysis

The open interest at these strikes is substantial, with 4,438 contracts at Rs 1,040 and 4,924 at Rs 1,050. The fresh volume traded on 9 July accounts for over half of the existing open interest, indicating active repositioning. This suggests traders are either initiating new hedges or increasing bearish exposure rather than merely rolling over old positions.

However, the open interest is not excessively high relative to the stock’s liquidity and market cap, which tempers the interpretation of a large-scale directional bet. The stock’s liquidity, with a 5-day average traded value supporting trades of around ₹31.35 crores, supports this level of options activity without undue strain.

Cash Market Context: Technical and Delivery Volume Insights

Infosys Ltd has seen a recent decline of 2.24% over two days, with a 1.85% drop on 9 July. The stock trades above its 5-day moving average but remains below longer-term averages, indicating short-term support but medium-term caution. The Rs 1,040 and Rs 1,050 strikes roughly correspond to a support zone near the 5-day MA, which aligns with the idea of hedging against a pullback rather than a collapse.

Delivery volumes rose by 15.7% on 8 July to 83.99 lakh shares, signalling increased investor participation despite the price decline. This rise in delivery volume amid falling prices may reflect profit booking or cautious repositioning, which could explain the surge in put buying as a protective measure rather than outright bearish conviction.

The stock’s dividend yield of 4.54% also adds a layer of income support, which may encourage investors to hedge rather than exit positions entirely. Does this technical and delivery volume context suggest a cautious but not panicked market stance?

Conclusion: Protective Hedging Most Likely, But Bearish Positioning Present

The heavy put activity at Rs 1,040 and Rs 1,050 strikes on Infosys Ltd ahead of the 28 July expiry is best interpreted as a blend of protective hedging and cautious bearish positioning. The proximity of the strikes to the current price, combined with the recent price decline and increased delivery volumes, suggests that many traders are seeking to limit downside risk rather than aggressively betting on a sharp fall.

Put writing as a bullish strategy appears less likely given the strike selection and market context. The open interest and volume data point to fresh positioning, but not an overwhelming directional consensus. The stock’s position relative to moving averages and its dividend yield further support the view that the market is managing risk amid uncertainty rather than signalling a decisive bearish trend.

With puts active and calls active on the same stock, buy, sell, or hold Infosys Ltd? The full analysis cuts through the options noise.

Key Data at a Glance

Disclaimer: Options trading involves significant risk and is not suitable for all investors. The interpretations presented are based on available data and do not constitute investment advice.

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