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

Put Option Activity Highlights

The most active put option for Larsen & Toubro is the 4100 strike price expiring on 24 February 2026. On this expiry date, a substantial 6,015 contracts were traded, generating a turnover of approximately ₹297.16 lakhs. The open interest stands at 5,742 contracts, indicating sustained interest in downside protection or speculative bearish bets at this strike level.

Given the underlying stock price of ₹4,162.8, the 4100 strike is positioned slightly out-of-the-money, which is a common level for investors seeking to hedge against moderate declines or to capitalise on anticipated downward moves. The volume and open interest figures underscore a significant concentration of put options at this strike, reflecting a cautious stance despite the stock’s proximity to its 52-week high of ₹4,195, just 0.8% away.

Price and Trend Analysis

Larsen & Toubro’s share price has recently experienced a mild pullback, falling by 0.12% on the latest trading day, slightly underperforming the sector’s marginal decline of 0.03% but lagging behind the Sensex’s modest gain of 0.16%. This dip follows three consecutive days of gains, suggesting a potential short-term trend reversal or profit booking by investors.

Technically, the stock remains robust, trading above its key moving averages – 5-day, 20-day, 50-day, 100-day, and 200-day – which typically signals a bullish medium to long-term outlook. However, the recent decline in delivery volume to 11.45 lakh shares on 10 February, down 11.08% from the five-day average, points to waning investor participation, which could be a precursor to increased volatility or consolidation.

Market Capitalisation and Quality Assessment

With a market capitalisation of ₹5,70,604 crore, Larsen & Toubro is firmly positioned as a large-cap stock within the construction sector. The company’s Mojo Score currently stands at 68.0, reflecting a Hold rating, a downgrade from its previous Buy grade on 2 February 2026. This adjustment indicates a more cautious outlook from analysts, likely influenced by recent market dynamics and sectoral headwinds.

Investor Positioning and Hedging Strategies

The surge in put option volumes at the 4100 strike suggests that market participants are either hedging existing long positions or speculating on a near-term correction. The open interest data corroborates this, as the sizeable number of outstanding contracts implies that traders are maintaining their bearish or protective stances rather than closing positions.

Such activity is typical in large-cap stocks that have recently rallied close to their highs, where investors seek to lock in gains or shield portfolios from unexpected downturns. The construction sector’s sensitivity to macroeconomic factors such as interest rates, infrastructure spending, and commodity prices further justifies this cautious approach.

Expiry Patterns and Market Implications

The 24 February 2026 expiry is a critical date for Larsen & Toubro’s option traders. The concentration of put options at the 4100 strike may act as a psychological support level, with market makers potentially adjusting hedges to maintain a balanced book. Should the stock price approach or breach this level, increased volatility could ensue as positions are unwound or rolled over to subsequent expiries.

Investors should monitor open interest changes and volume spikes in the days leading up to expiry to gauge shifts in market sentiment. Additionally, the interplay between put and call option activity will provide further clues on directional bias and risk appetite.

Sectoral Context and Comparative Performance

Within the construction sector, Larsen & Toubro’s recent performance aligns closely with sector trends, which have been subdued amid concerns over rising input costs and regulatory uncertainties. The stock’s slight underperformance relative to the Sensex on the latest trading day highlights the cautious mood prevailing among investors.

However, the company’s strong fundamentals, large market cap, and diversified order book continue to support its medium-term outlook. The downgrade to a Hold rating reflects a prudent stance given current market conditions rather than a fundamental deterioration.

Investor Takeaways

For investors, the heightened put option activity at the 4100 strike price offers valuable insight into market expectations. Those holding long positions in Larsen & Toubro may consider protective strategies such as buying puts or employing collars to mitigate downside risk. Conversely, traders with a bearish outlook might view the current option volumes as an opportunity to position for a potential correction.

Monitoring the stock’s price action relative to key moving averages and delivery volumes will be crucial in assessing the sustainability of recent gains. Additionally, keeping an eye on option expiry dynamics can help anticipate volatility spikes and adjust portfolios accordingly.

Conclusion

Larsen & Toubro Ltd. remains a pivotal stock in the construction sector, with its option market activity providing a window into investor sentiment and risk management approaches. The surge in put option trading at the 4100 strike ahead of the 24 February expiry underscores a cautious mood, balancing optimism from recent highs with prudent hedging against potential downside. Investors should weigh these signals carefully in the context of broader market trends and company fundamentals.

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