ITC Ltd Sees Heavy Call Option Activity Amid Bearish Stock Momentum

Robust Call Option Trading Highlights Investor Interest

On 20 January 2026, ITC Ltd. emerged as one of the most actively traded stocks in the options market, with call options at the ₹350 strike price dominating volumes. A total of 18,508 contracts changed hands, generating a turnover of approximately ₹11.85 crores. Open interest at this strike stands at 21,246 contracts, indicating sustained investor interest and positioning ahead of the expiry date.

The underlying stock price closed at ₹328.6, just 0.38% above its 52-week low of ₹327.3, underscoring the stock’s vulnerability despite the call option activity. This juxtaposition suggests that while some market participants are positioning for a potential rebound, the broader sentiment remains cautious.

Price and Technical Analysis Paint a Bearish Picture

ITC’s share price has underperformed relative to its sector and the broader market in recent sessions. On 20 January, the stock declined by 1.68%, slightly underperforming the FMCG sector’s 1.67% drop and the Sensex’s 0.97% fall. The stock is trading below its 5-day, 20-day, 50-day, 100-day, and 200-day moving averages, signalling a sustained downtrend.

Investor participation has also waned, with delivery volumes on 19 January falling by 40.87% compared to the five-day average, indicating reduced conviction among long-term holders. Despite this, liquidity remains adequate, with the stock’s average traded value supporting trade sizes up to ₹14.25 crores, ensuring smooth execution for institutional investors.

Mojo Score and Ratings Reflect Caution

ITC Ltd. currently holds a Mojo Score of 48.0, categorised as a 'Sell' rating by MarketsMOJO, a downgrade from its previous 'Hold' status as of 29 December 2025. The market cap grade is 1, reflecting its large-cap status with a market capitalisation of ₹4,18,226 crores. This downgrade aligns with the technical weakness and subdued investor sentiment observed in recent trading sessions.

The downgrade signals that despite the FMCG sector’s traditionally defensive characteristics, ITC faces headwinds that may limit near-term upside. Investors should weigh these factors carefully when considering exposure to the stock.

Expiry Patterns and Strike Price Implications

The concentration of call option activity at the ₹350 strike price, which is approximately 6.5% above the current underlying price, suggests that traders are speculating on a moderate recovery by the 27 January expiry. However, the open interest and volume data also imply that many participants may be hedging existing positions or engaging in spread strategies rather than outright bullish bets.

Given the stock’s proximity to its 52-week low and the prevailing downtrend, the likelihood of a sharp rally to breach the ₹350 level by expiry appears limited. This dynamic may result in some call options expiring worthless, potentially benefiting option sellers who have taken advantage of elevated premiums amid volatility.

Sector Context and Comparative Performance

Within the FMCG sector, ITC’s performance has lagged behind peers, many of which have shown resilience amid broader market volatility. The sector’s 1.67% decline on the day was marginally less severe than ITC’s 1.68% drop, highlighting the stock’s relative weakness. This underperformance is notable given ITC’s diversified business model spanning cigarettes, packaged foods, and personal care products.

Investors should consider alternative FMCG stocks with stronger momentum and more favourable technical setups, especially given ITC’s current sell rating and subdued fundamentals.

Investor Takeaway: Weighing Bullish Options Against Bearish Fundamentals

The heavy call option activity in ITC Ltd. ahead of the 27 January expiry reflects a nuanced market stance. While the volume and open interest at the ₹350 strike price indicate some bullish positioning, the stock’s technical indicators and fundamental ratings counsel caution. The downgrade to a 'Sell' rating by MarketsMOJO and the stock’s trading below all major moving averages suggest that downside risks remain significant.

Investors should monitor price action closely in the coming days, particularly the stock’s ability to sustain levels above key resistance near ₹330-335. A decisive break above these levels could validate the bullish option bets, but failure to do so may result in further declines and option premium erosion.

Given the current environment, a balanced approach that considers both the potential for short-term rebounds and the prevailing bearish momentum is advisable. Diversification within the FMCG sector and consideration of higher-rated alternatives may better serve risk-adjusted returns.

Looking Ahead: Expiry Week Volatility and Strategic Positioning

Expiry weeks often bring heightened volatility, and ITC’s options market is no exception. Traders should be prepared for rapid price swings as positions are squared off or rolled forward. The substantial open interest at the ₹350 call strike may lead to increased gamma and delta hedging activity by market makers, potentially amplifying intraday moves.

For long-term investors, the current sell rating and technical weakness suggest a cautious stance until clearer signs of recovery emerge. Meanwhile, short-term traders might find opportunities in volatility but should remain vigilant about risk management given the stock’s proximity to multi-year lows.

Summary

ITC Ltd.’s recent surge in call option volumes at the ₹350 strike price ahead of the 27 January 2026 expiry highlights a complex interplay between bullish speculation and bearish fundamentals. Despite the optimism implied by option traders, the stock’s technical and fundamental indicators remain weak, with a recent downgrade to a sell rating and trading near 52-week lows. Investors are advised to approach the stock with caution, considering alternative FMCG picks with stronger momentum and ratings.

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