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

Put Option Activity Highlights

On 9 February 2026, Larsen & Toubro emerged as the most active stock in put options trading, with two key strike prices attracting substantial volumes. The 4020 strike price saw 2,821 contracts traded, generating a turnover of ₹114.88 lakhs and an open interest of 1,649 contracts. Similarly, the 3960 strike price recorded 2,778 contracts traded, with a turnover of ₹55.91 lakhs and an open interest of 1,239 contracts. These strike prices lie below the underlying stock value of ₹4,109.30, indicating that traders are positioning for potential downside or seeking protection against a decline.

The concentration of put option activity at these levels, especially with the 4020 strike commanding the highest turnover, reflects a strategic hedging approach or outright bearish bets. The expiry date of 24 February 2026 is less than three weeks away, intensifying the focus on short-term price movements and volatility expectations.

Stock Performance and Technical Context

Despite the heavy put option interest, Larsen & Toubro’s stock price remains resilient. It closed just 2.42% shy of its 52-week high of ₹4,195, maintaining an upward trajectory with gains over the past two consecutive days, delivering a 0.8% return in that period. The stock’s performance today was broadly in line with the construction sector, which itself gained 0.83%, while the Sensex rose 0.40%.

Technically, LT is trading above all major moving averages — 5-day, 20-day, 50-day, 100-day, and 200-day — signalling a strong bullish trend. However, a notable decline in investor participation has been observed, with delivery volumes on 6 February falling by 30.41% compared to the five-day average, suggesting some caution among long-term holders.

Liquidity remains robust, with the stock’s average traded value supporting trade sizes up to ₹19.1 crores, ensuring that option market activity is backed by sufficient underlying liquidity.

Investor Sentiment and Market Implications

The surge in put option volumes at strike prices near ₹4,000, below the current market price, suggests that investors are either hedging existing long positions or speculating on a near-term correction. This is particularly relevant given the stock’s recent rally and proximity to its 52-week high. The open interest figures indicate that these positions are not fleeting but represent meaningful exposure.

Market participants often use put options as insurance against downside risk, especially in large-cap stocks like Larsen & Toubro, which have significant institutional ownership. The construction sector’s cyclical nature and sensitivity to macroeconomic factors such as interest rates, government spending, and commodity prices may be contributing to this cautious stance.

Moreover, the stock’s Mojo Score of 68.0 and a current Mojo Grade of Hold, downgraded from Buy on 2 February 2026, reflect a tempered outlook from analysts. This downgrade may have influenced the increased put option activity as investors recalibrate their risk exposure.

Expiry Patterns and Strategic Positioning

The 24 February 2026 expiry is attracting concentrated activity, which is typical as traders adjust their portfolios ahead of contract settlements. The clustering of open interest at the 4020 and 3960 strikes suggests these levels are viewed as critical support zones or potential pivot points. Should the stock price breach these levels, it could trigger further option-related volatility.

Investors and traders should monitor the evolving open interest and volume data closely, as shifts in these metrics can presage directional moves. The interplay between the underlying stock’s technical strength and the options market’s bearish positioning creates a nuanced risk-reward scenario.

Broader Market Context and Sectoral Trends

The construction sector, represented by Larsen & Toubro, continues to be a bellwether for India’s infrastructure growth story. While the sector has shown resilience, it remains vulnerable to global economic uncertainties, commodity price fluctuations, and policy shifts. These factors contribute to the mixed signals seen in the options market.

Investors should weigh the stock’s strong technical positioning against the evident caution in derivatives markets. The current put option interest may also reflect a prudent approach to risk management rather than outright bearishness, especially given the stock’s large-cap status and institutional backing.

Conclusion: Navigating the Options Landscape

Larsen & Toubro’s heavy put option activity ahead of the 24 February expiry highlights a complex market sentiment. While the stock maintains a bullish technical stance and trades near its yearly highs, the options market reveals a layer of caution and hedging. Investors should consider this duality when making portfolio decisions, balancing the stock’s fundamentals and sector outlook with the protective strategies evident in the options data.

Close monitoring of open interest changes, strike price concentrations, and expiry dynamics will be essential for anticipating potential price movements. As always, a disciplined approach to risk and reward remains paramount in navigating the evolving landscape of large-cap construction stocks like Larsen & Toubro.

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