Mahindra & Mahindra Sees Heavy Put Option Activity Amid Mixed Market Signals

Put Option Activity Highlights

On 3 February 2026, M&M recorded an impressive 5,399 contracts traded in put options at the ₹3,500 strike price, generating a turnover of approximately ₹6.82 crores. The open interest stood at 1,746 contracts, underscoring sustained investor interest in downside protection or speculative bearish bets. This activity is particularly noteworthy given the underlying stock price was ₹3,535.40, hovering just above the strike price, which often indicates a critical support level being tested by market participants.

The expiry date of 24 February 2026 is less than three weeks away, suggesting that traders are actively positioning ahead of potential near-term catalysts or volatility events. The concentration of put options at this strike price may also imply expectations of a price correction or increased downside risk in the short term.

Stock Performance and Market Context

Despite the heavy put option interest, M&M’s stock performance has been relatively resilient. The share price has gained 5.3% over the past two consecutive trading days, including a 5.05% gap-up opening on 3 February 2026. Intraday, the stock touched a high of ₹3,643.80, marking a 5.21% increase. This performance aligns closely with the broader automobile sector’s passenger car segment, which advanced by 2.46% on the same day.

However, technical indicators present a mixed picture. The stock price currently trades above its 5-day and 200-day moving averages but remains below the 20-day, 50-day, and 100-day averages. This suggests that while short-term momentum is positive, medium-term trends may still be under pressure, possibly contributing to the cautious stance reflected in put option volumes.

Investor participation appears to be waning, with delivery volumes on 2 February falling by 48.72% compared to the five-day average, despite the stock’s upward price movement. This divergence could indicate that the recent gains are driven more by speculative or short-term traders rather than sustained institutional buying.

Valuation and Market Capitalisation

Mahindra & Mahindra Ltd is classified as a large-cap stock with a market capitalisation of ₹4,46,166 crores. The company operates within the automobile industry, a sector that continues to face cyclical headwinds amid global supply chain disruptions and evolving consumer preferences. The current Mojo Score of 61.0 and a Mojo Grade of Hold, downgraded from Buy on 1 February 2026, reflect a tempered outlook from MarketsMOJO analysts, who cite valuation concerns and sectoral challenges as key factors.

Investor Sentiment and Hedging Strategies

The surge in put option volumes at the ₹3,500 strike price suggests that investors are either hedging existing long positions or speculating on a potential downside move. Given the stock’s recent gains and the sector’s moderate advance, the elevated put activity may be a prudent risk management tactic amid uncertain macroeconomic conditions and sector-specific challenges.

Open interest data indicates that these put options are not merely short-term speculative trades but part of a broader positioning strategy. The relatively high open interest of 1,746 contracts implies that many investors are maintaining their bearish or protective stances rather than closing out positions quickly.

Expiry Patterns and Market Implications

With the 24 February expiry approaching, the clustering of put options at the ₹3,500 strike price could lead to increased volatility as traders adjust their positions. If the stock price remains above this level, put sellers may face losses, potentially triggering short covering and upward price pressure. Conversely, a breach below ₹3,500 could accelerate downside momentum as protective puts gain intrinsic value.

Market participants should also monitor broader sector trends and macroeconomic indicators, as these will influence M&M’s price trajectory and option market dynamics in the coming weeks.

Comparative Sector Performance

On 3 February, M&M’s one-day return of 2.64% closely tracked the automobile sector’s 2.68% gain and the Sensex’s 3.06% advance. This relative performance suggests that while M&M is moving in line with sector peers, it is not outperforming significantly, which may explain the cautious stance among options traders.

Liquidity remains robust, with the stock’s traded value supporting trade sizes up to ₹28.46 crores based on 2% of the five-day average traded value. This liquidity facilitates active options trading and allows institutional investors to implement complex hedging strategies efficiently.

Outlook and Investor Takeaways

Mahindra & Mahindra Ltd’s current put option activity reflects a nuanced market view. While the stock has demonstrated short-term strength, the concentration of bearish options at a key strike price signals caution among investors. The downgrade from Buy to Hold by MarketsMOJO analysts further underscores the need for prudence, especially given the stock’s mixed technical signals and sectoral headwinds.

Investors should closely monitor price action around the ₹3,500 level and expiry dynamics later this month. Those holding long positions may consider protective puts to mitigate downside risk, while speculative traders might find opportunities in volatility swings. Additionally, comparing M&M with other large-cap automobile stocks and sector peers could reveal more attractive risk-reward profiles.

Overall, the interplay between bullish price momentum and heavy put option interest suggests a market balancing act between optimism and caution, making Mahindra & Mahindra Ltd a stock to watch closely in the near term.

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