Larsen & Toubro Sees Heavy Put Option Activity Amid Bearish Hedging Ahead of February Expiry

Put Option Surge at Key Strike Prices

Data from the derivatives market reveals that Larsen & Toubro Ltd. has emerged as the most active stock in put options trading, with two strike prices attracting substantial volumes. The 3,900 strike price saw 2,058 contracts traded, generating a turnover of ₹294.35 lakhs, while the 3,800 strike price recorded 1,898 contracts with a turnover of ₹152.32 lakhs. Open interest at these strikes stands at 1,988 and 3,246 contracts respectively, indicating sustained investor interest and potential hedging activity.

The underlying stock price closed at ₹3,912.90, positioning the 3,900 strike slightly out-of-the-money and the 3,800 strike moderately out-of-the-money. This concentration of put option activity near the current market price suggests that investors are either protecting long positions or speculating on a near-term downside.

Expiry Patterns and Market Implications

The expiry date of 24 February 2026 is less than a month away, intensifying the focus on these put options. Typically, heavy put buying near expiry can indicate hedging against potential declines or outright bearish bets. Given the sizeable open interest and turnover, market participants appear to be positioning for increased volatility or a correction in LT’s share price.

Interestingly, the stock has outperformed its sector by 1.07% today and reversed a two-day losing streak, touching an intraday high of ₹3,930.80, a 3.06% gain. However, technical indicators show the price remains below the 20-day and 50-day moving averages, despite trading above the 5-day, 100-day, and 200-day averages. This mixed technical picture may be contributing to the cautious stance reflected in options trading.

Investor Participation and Liquidity

Investor participation has been rising, with delivery volumes reaching 16.64 lakh shares on 30 January, an 11.09% increase over the five-day average. The stock’s liquidity remains robust, supporting trade sizes up to ₹22.9 crore based on 2% of the five-day average traded value. Such liquidity is conducive to active options trading and allows institutional players to execute sizeable hedging strategies efficiently.

Mojo Score Upgrade Reflects Positive Fundamentals

Larsen & Toubro Ltd. currently holds a Mojo Score of 71.0, upgraded from a previous Hold to a Buy rating on 8 January 2026. This upgrade reflects improved fundamentals and a positive outlook from MarketsMOJO’s Investment Committee. Despite the bearish undertones in options activity, the company’s large-cap status and market cap of ₹5,24,521 crore underpin its resilience in the construction sector.

The stock’s day return of 2.95% notably outpaces the sector’s 1.82% and the Sensex’s modest 0.22% gain, underscoring LT’s relative strength. However, the presence of heavy put option volumes suggests that some investors are hedging against potential near-term volatility or downside risks, possibly linked to broader macroeconomic concerns or sector-specific challenges.

Bearish Positioning or Strategic Hedging?

Heavy put option activity can be interpreted in multiple ways. On one hand, it may signal bearish sentiment, with traders speculating on a price decline below the 3,900 and 3,800 strike levels. On the other, it could represent prudent hedging by long-term investors seeking protection against sudden market corrections ahead of the February expiry.

Given LT’s mixed technical signals and the broader construction sector’s sensitivity to economic cycles, the surge in put options may be a reflection of cautious optimism. Investors appear to be balancing the stock’s strong fundamentals with the need to guard against short-term risks.

Outlook and Investor Considerations

For investors, the current options activity in Larsen & Toubro Ltd. warrants close monitoring. The stock’s ability to sustain gains above key moving averages and maintain delivery volumes will be critical in determining whether the bearish put positioning materialises into price declines or remains a hedging mechanism.

Market participants should also consider the broader economic environment, including infrastructure spending trends and government policies impacting the construction sector. These factors will influence LT’s performance and the sentiment reflected in derivatives markets.

Conclusion: Navigating Volatility with Strategic Insight

Larsen & Toubro Ltd.’s recent surge in put option volumes ahead of the 24 February expiry highlights a nuanced market stance. While the stock demonstrates strong fundamentals and has outperformed its sector, the elevated put activity points to increased caution among investors. Whether this reflects outright bearish bets or strategic hedging, it underscores the importance of vigilant risk management in today’s dynamic market environment.

Investors should weigh LT’s robust market cap and upgraded Mojo Grade against the technical and derivatives signals, maintaining a balanced approach to portfolio positioning. As the expiry date approaches, monitoring open interest trends and price movements will provide further clarity on market sentiment and potential price trajectories.

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