Larsen & Toubro Sees Heavy Put Option Activity Amid Mixed Market Signals

Put Option Activity Highlights

Data from the options market reveals Larsen & Toubro as the dominant name in put option volumes, with four key strike prices attracting significant interest. The 3800 strike price leads with 3,647 contracts traded, generating a turnover of ₹304.8 lakhs and an open interest of 3,236 contracts. Close behind is the 3900 strike with 3,076 contracts traded and a substantial turnover of ₹457.0 lakhs, alongside an open interest of 1,224. The 3600 and 3700 strikes also saw robust activity, with 1,946 and 1,937 contracts traded respectively, and open interests of 1,519 and 911.

This concentrated put option activity at strike prices ranging from 3600 to 3900, all below or near the current underlying value of ₹3,886.3, indicates that investors are positioning for potential downside or are actively hedging existing long positions. The expiry date of 24 February 2026 is less than a month away, adding urgency to these trades as market participants seek to manage risk or capitalise on expected volatility.

Stock Performance and Market Context

Interestingly, Larsen & Toubro’s stock price has been resilient in recent sessions. It has outperformed its sector by 1.5% today and recorded a 2.7% gain compared to the Sensex’s 0.48% decline. Over the past three days, LT has delivered a cumulative return of 4.45%, touching an intraday high of ₹3,932.6, a 3.65% rise on the day. The stock trades above its 5-day, 100-day, and 200-day moving averages, though it remains below the 20-day and 50-day averages, suggesting some near-term resistance.

Investor participation has also increased, with delivery volumes rising 5.15% to 13.94 lakh shares on 28 January 2026, signalling sustained interest from long-term holders. Liquidity remains healthy, supporting trade sizes up to ₹18.01 crore based on recent average traded values.

Mojo Score Upgrade and Analyst Sentiment

Larsen & Toubro’s mojo score has recently improved to 71.0, earning a ‘Buy’ grade as of 8 January 2026, upgraded from a previous ‘Hold’. This reflects positive fundamental and technical assessments, including strong market cap grading (Grade 1) and favourable trend indicators. The upgrade signals growing confidence in LT’s medium-term prospects, driven by its diversified construction portfolio and robust order book.

However, the surge in put option volumes suggests that some investors remain cautious, possibly anticipating near-term volatility or sector-specific headwinds. The construction sector often faces cyclical pressures from raw material costs, regulatory changes, and macroeconomic factors, which could explain the hedging activity.

Expiry Patterns and Investor Strategies

The clustering of put option trades around the 24 February expiry is notable. This expiry is the first monthly options expiry after the recent quarterly results season, making it a critical juncture for reassessing valuations and risk. The high open interest at the 3800 strike, well below the current market price, indicates that many investors are either protecting gains or speculating on a pullback.

Such positioning can also be interpreted as a strategic hedge against broader market uncertainties, including inflationary pressures and interest rate expectations that could impact infrastructure spending. The relatively high turnover in put options compared to calls suggests a skew towards bearish or defensive strategies in the near term.

Implications for Investors

For investors, the mixed signals from LT’s price action and options market activity warrant a balanced approach. While the mojo upgrade and recent price gains support a positive medium-term outlook, the heavy put option interest highlights the need for caution and risk management. Investors might consider monitoring open interest changes and strike price concentrations as indicators of shifting market sentiment.

Those holding LT shares could view the put option activity as a natural hedge, while traders might explore volatility plays or protective strategies ahead of the February expiry. Given LT’s large-cap status and liquidity, it remains a key stock for portfolio allocation within the construction sector.

Sector and Market Outlook

The construction sector, represented by Larsen & Toubro, continues to navigate a challenging environment marked by fluctuating commodity prices and evolving government infrastructure policies. LT’s ability to outperform its sector by 1.5% today and maintain gains over recent sessions underscores its resilience and market leadership.

Nevertheless, the options market activity suggests that investors are bracing for potential short-term corrections or volatility spikes. This duality reflects broader market dynamics where large-cap stocks often attract both bullish conviction and protective hedging simultaneously.

As the 24 February expiry approaches, market participants will closely watch LT’s price movements and options open interest for clues on directional bias and risk appetite. The interplay between fundamental upgrades and technical resistance levels will be critical in shaping near-term trends.

Conclusion

Larsen & Toubro Ltd. stands at a crossroads with a recent mojo score upgrade and strong price performance contrasted by heavy put option activity signalling caution. The concentrated put trades at strike prices between 3600 and 3900 ahead of the February expiry highlight a market preparing for possible downside or volatility, despite the stock’s underlying strength.

Investors should weigh these factors carefully, balancing LT’s robust fundamentals and sector leadership against the evident hedging and bearish positioning in the options market. This nuanced picture calls for vigilant monitoring and strategic risk management as the construction heavyweight navigates the evolving market landscape.

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