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

Put Option Activity Highlights

On 2 February 2026, Larsen & Toubro saw an extraordinary volume of put options traded, particularly at strike prices of ₹3,900 and ₹4,000, both expiring on 24 February 2026. The ₹4,000 strike put options led the activity with 3,172 contracts traded, generating a turnover of approximately ₹232.64 lakhs and an open interest of 3,364 contracts. Close behind, the ₹3,900 strike put options recorded 3,123 contracts traded, with turnover of ₹106.63 lakhs and open interest standing at 3,297 contracts. This concentrated activity at these strikes, which are below the current underlying value of ₹4,063.6, signals a strategic bearish stance or protective hedging by market participants.

Stock Price Context and Technical Positioning

Interestingly, Larsen & Toubro’s stock price remains robust, trading just 3.02% shy of its 52-week high of ₹4,195. The stock has gained 3.53% on the day, slightly underperforming the Capital Goods sector’s 4.21% rise but outperforming the broader Sensex’s 2.56% gain. The stock has also recorded a consecutive two-day gain, delivering a cumulative return of 6.77% over this period. It opened with a gap up of 4.99% and touched an intraday high of ₹4,122, marking a 5.12% rise on the day.

From a technical standpoint, Larsen & Toubro is trading above all key moving averages — 5-day, 20-day, 50-day, 100-day, and 200-day — underscoring a strong upward momentum. Delivery volumes have risen by 11.33% compared to the five-day average, with 18.28 lakh shares delivered on 2 February, reflecting heightened investor participation. The stock’s liquidity remains healthy, supporting trade sizes up to ₹23.49 crore based on 2% of the five-day average traded value.

Interpreting the Put Option Surge

The pronounced put option activity at strikes ₹3,900 and ₹4,000, both below the current market price, suggests investors are positioning for a potential downside or seeking protection against volatility. The open interest figures, exceeding 3,200 contracts at each strike, indicate these are not isolated trades but part of a broader market consensus or hedging strategy.

Put options serve as insurance for long stock holders or speculative bets on price declines. Given Larsen & Toubro’s recent strong performance and proximity to its 52-week high, the surge in puts may reflect cautious sentiment amid concerns over valuation or sector-specific headwinds. The construction sector, while currently buoyant, faces challenges such as raw material cost inflation, regulatory delays, and geopolitical uncertainties that could impact project timelines and profitability.

Fundamental and Market Sentiment Analysis

Larsen & Toubro, with a market capitalisation of ₹5,58,443.26 crore, remains a heavyweight in the construction industry. However, its Mojo Score has recently been downgraded from a Buy to a Hold on 2 February 2026, reflecting a more cautious outlook. The current Mojo Grade of 68.0 suggests moderate confidence in the stock’s near-term prospects, tempered by valuation concerns and sector volatility.

This downgrade aligns with the increased put option activity, signalling that institutional and retail investors alike may be recalibrating their risk exposure. The stock’s Market Cap Grade of 1 confirms its large-cap status, but the shift in sentiment highlights the importance of monitoring evolving market dynamics closely.

Expiry Patterns and Investor Behaviour

The expiry date of 24 February 2026 is just over three weeks away, a critical timeframe for option traders to adjust positions ahead of quarterly results or macroeconomic announcements. The clustering of put options at strikes near the current price suggests investors are bracing for a potential correction or increased volatility in the short term.

Such expiry patterns often precede market inflection points, where hedging activity intensifies to mitigate downside risks. The relatively high turnover of ₹232.64 lakhs at the ₹4,000 strike compared to ₹106.63 lakhs at ₹3,900 indicates a preference for protection closer to the current market price, reflecting a nuanced bearish stance rather than outright pessimism.

Balancing Bullish Momentum with Bearish Hedging

The juxtaposition of Larsen & Toubro’s strong price momentum and the heavy put option activity presents a complex picture. On one hand, the stock’s technical indicators and recent gains suggest sustained investor confidence. On the other, the surge in put buying reveals a layer of caution, possibly driven by concerns over near-term risks or profit-taking ahead of key events.

Investors should weigh these factors carefully. The stock’s liquidity and rising delivery volumes support active trading, but the downgrade in Mojo Grade and the concentrated put option interest warrant vigilance. Those holding long positions might consider protective strategies, while prospective buyers should monitor price action and option market signals closely.

Sector and Broader Market Context

The Capital Goods sector, which includes Larsen & Toubro, has gained 4.21% on the day, outperforming the Sensex’s 2.56% rise. This sectoral strength is underpinned by government infrastructure initiatives and robust order books. However, sector volatility remains a factor, influenced by commodity price fluctuations and policy developments.

Within this environment, Larsen & Toubro’s put option activity may also reflect sector-wide hedging or speculative positioning. Market participants often use options to manage exposure across correlated stocks, especially in large-cap, high-liquidity names like LT.

Outlook and Investor Takeaways

In summary, Larsen & Toubro Ltd. is at a crossroads where bullish technical momentum meets cautious option market sentiment. The heavy put option volumes at strikes ₹3,900 and ₹4,000 expiring in late February highlight a significant degree of bearish positioning or hedging, despite the stock’s proximity to its 52-week high and recent gains.

Investors should consider the implications of this duality. While the stock’s fundamentals and sectoral tailwinds remain supportive, the increased put activity signals that downside risks are being actively managed by market participants. A prudent approach would involve monitoring option open interest trends, expiry dynamics, and any changes in the company’s fundamental outlook as reflected in Mojo Scores and grades.

Given the current Hold rating and the recent downgrade from Buy, investors may wish to reassess their exposure and explore alternative opportunities within the construction or capital goods space, especially those identified through comprehensive multi-parameter analyses.

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