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

Put Option Activity Highlights

On 6 February 2026, Larsen & Toubro emerged as the most active stock in put options, with 2,871 contracts traded for the 24 February expiry at the ₹3,900 strike price. This activity generated a turnover of approximately ₹74.2 lakhs, reflecting significant investor interest in downside protection or speculative bearish bets. The open interest at this strike stands at 3,257 contracts, indicating a substantial build-up of positions that could influence price dynamics as expiry approaches.

The underlying stock closed at ₹4,065.7, roughly 3.12% below its 52-week high of ₹4,195, suggesting that while the stock remains near its peak, traders are positioning for potential downside or volatility. The ₹3,900 strike price is notably below the current market price, which may imply hedging strategies by longs or outright bearish bets anticipating a correction.

Price and Volume Context

Larsen & Toubro’s price performance on the day was largely inline with its sector, registering a marginal gain of 0.01%, compared to the sector’s 0.05% rise and the Sensex’s decline of 0.41%. The stock has been trading within a narrow range of ₹33.3, reflecting subdued volatility despite the active options market.

Technical indicators show the stock trading above its key moving averages — 5-day, 20-day, 50-day, 100-day, and 200-day — signalling an overall bullish trend. However, investor participation appears to be waning, with delivery volumes on 5 February falling by over 50% compared to the five-day average, suggesting reduced conviction among buyers at current levels.

Liquidity remains robust, with the stock’s average traded value supporting trade sizes up to ₹20.85 crores, ensuring that the options market activity is backed by sufficient underlying liquidity to absorb large trades without excessive slippage.

Investor Sentiment and Hedging Implications

The surge in put option volumes at a strike price below the current market level suggests that investors are either hedging existing long positions or speculating on a near-term pullback. Given the stock’s proximity to its 52-week high and the recent downgrade in its Mojo Grade from Buy to Hold on 2 February 2026, market participants appear to be adopting a more cautious stance.

Larsen & Toubro’s Mojo Score currently stands at 68.0, reflecting a moderate outlook with a Hold rating. The downgrade from Buy indicates a reassessment of the company’s near-term prospects, possibly influenced by sectoral headwinds or valuation concerns. The Market Cap Grade remains at 1, underscoring its status as a large-cap stock with significant market presence but limited upside momentum in the immediate term.

Options traders often use put contracts as insurance against downside risk, especially in large-cap stocks where portfolio managers seek to protect gains. The open interest accumulation at the ₹3,900 strike price, combined with the high turnover, points to active risk management strategies ahead of the February expiry.

Sector and Market Comparison

Within the construction sector, Larsen & Toubro remains a bellwether, and its option market activity often presages broader sector sentiment. The sector’s modest gain of 0.05% on the day contrasts with the Sensex’s decline, highlighting relative resilience. However, the increased put buying in LT may signal caution among investors about potential sectoral challenges such as raw material cost inflation, project execution delays, or regulatory uncertainties.

Comparatively, the Sensex’s 0.41% drop suggests a risk-off mood in the broader market, which may be influencing hedging demand in blue-chip stocks like Larsen & Toubro. The interplay between the underlying stock’s technical strength and the options market’s bearish positioning creates a nuanced picture for investors to analyse.

Outlook and Strategic Considerations

For investors and traders, the current options market activity in Larsen & Toubro offers valuable insights into market psychology. The elevated put volumes at the ₹3,900 strike price, combined with the stock’s technical positioning, suggest a market bracing for potential volatility or a corrective phase.

Long-term investors should weigh the company’s fundamental strengths against the near-term caution signalled by options traders. The construction sector’s cyclical nature and LT’s large-cap status imply that any pullback could present buying opportunities, especially if the stock remains above key moving averages and maintains liquidity.

Meanwhile, traders might consider the put option activity as a signal to monitor downside risk closely, potentially employing hedging strategies or adjusting portfolio exposures accordingly. The expiry on 24 February 2026 will be a critical juncture to assess whether the bearish sentiment materialises or dissipates.

Company Profile and Market Capitalisation

Larsen & Toubro Ltd. is a leading player in the construction industry with a market capitalisation of ₹5,58,526 crores, categorising it firmly as a large-cap stock. Its diversified operations and strong order book have historically supported steady growth, although recent market dynamics have prompted a reassessment of its near-term outlook.

Investors should continue to monitor key financial metrics, sector developments, and broader market trends to gauge the stock’s trajectory. The current Mojo Grade of Hold reflects a balanced view, acknowledging both the company’s strengths and the risks posed by market uncertainties.

Conclusion

The pronounced activity in Larsen & Toubro’s put options market ahead of the 24 February expiry underscores a cautious investor stance despite the stock’s proximity to its 52-week high. The combination of technical strength, reduced investor participation, and increased hedging interest paints a complex picture that demands careful analysis.

Market participants should remain vigilant to evolving price action and options market signals, using these insights to inform strategic decisions. While the stock’s fundamentals remain robust, the current environment favours a measured approach, balancing upside potential with prudent risk management.

Unlock special upgrade rates for a limited period. Start Saving Now →