Tata Consultancy Services Sees Heavy Call Option Activity Ahead of January Expiry

Robust Call Option Volume Highlights Investor Interest

The most active call options for TCS are concentrated at the ₹3,300 strike price, with 6,079 contracts traded recently. This surge in call option volume corresponds to a turnover of approximately ₹12.19 crores, reflecting substantial investor interest in leveraged bullish bets on the stock. Open interest at this strike stands at 17,378 contracts, indicating a strong build-up of positions that could influence price dynamics as expiry approaches.

Underlying Stock Performance and Market Context

Despite the heightened options activity, TCS’s underlying share price has shown signs of strain. The stock closed at ₹3,228, down 1.04% on the day, underperforming its sector by 0.34% and the broader Sensex by 1.02%. This decline follows a three-day rally, marking a potential trend reversal. The stock traded within a narrow range of ₹27.2, suggesting consolidation amid mixed investor sentiment.

Technical indicators present a nuanced picture. TCS remains above its 50-day, 100-day, and 200-day moving averages, signalling long-term strength. However, it is currently trading below its 5-day and 20-day moving averages, reflecting short-term weakness. Rising delivery volumes, which surged by 80.66% to 30.55 lakh shares on 13 January compared to the five-day average, indicate increased investor participation and potential accumulation despite recent price softness.

Valuation and Dividend Appeal

From a valuation standpoint, TCS maintains a high market capitalisation of ₹11,82,246 crores, categorising it firmly as a large-cap stock. The company offers a dividend yield of 3.92%, which remains attractive in the current low-interest-rate environment, potentially supporting investor confidence amid volatility.

Mojo Score Upgrade Reflects Improving Fundamentals

MarketsMOJO’s latest assessment upgraded TCS’s Mojo Grade from Sell to Hold on 22 April 2025, with a current Mojo Score of 57.0. This upgrade reflects improving fundamentals and a more balanced risk-reward profile. However, the Market Cap Grade remains at 1, indicating that despite its size, the stock’s valuation and growth metrics warrant cautious optimism rather than outright enthusiasm.

Expiry Patterns and Investor Positioning

The concentration of call options at the ₹3,300 strike price, which is approximately 2.2% above the current underlying price, suggests that investors are positioning for moderate upside in the near term. The expiry date of 27 January 2026 is just under two weeks away, which typically intensifies trading activity as market participants adjust or close positions.

Open interest data reveals that a significant number of contracts remain outstanding, which could lead to increased volatility as traders hedge or unwind positions. The elevated turnover and open interest at this strike price indicate that market participants are either speculating on a rebound or hedging existing long stock positions against downside risk.

Sectoral and Market Comparisons

Within the Computers - Software & Consulting sector, TCS’s 1-day return of -1.04% slightly underperformed the sector’s -0.55% decline, signalling relative weakness. The broader Sensex was largely flat, down just 0.02%, underscoring that TCS’s movement is more stock-specific than market-driven. This divergence may be attributed to sector rotation or profit-taking after recent gains.

Liquidity and Trading Viability

Liquidity remains robust for TCS, with the stock’s traded value comfortably supporting trade sizes up to ₹22.17 crores based on 2% of the five-day average traded value. This liquidity ensures that institutional and retail investors can execute sizeable trades without significant market impact, which is crucial given the active options market and the stock’s large-cap status.

Investor Takeaway: Balancing Bullish Options with Underlying Caution

The heavy call option activity at the ₹3,300 strike price for TCS suggests that investors are cautiously optimistic about the stock’s near-term prospects. While the underlying share price has shown some weakness, the sustained open interest and turnover in call options indicate a belief in potential upside, possibly driven by expectations of positive earnings revisions or sector tailwinds.

However, the recent downgrade in short-term moving averages and the stock’s underperformance relative to its sector highlight the need for prudence. Investors should monitor price action closely as expiry approaches, particularly given the sizeable open interest that could amplify volatility.

Long-term investors may find comfort in TCS’s strong market capitalisation, dividend yield, and upgraded Mojo Grade, but short-term traders should be prepared for potential swings driven by options expiry dynamics and sector rotation.

Conclusion

Tata Consultancy Services Ltd. remains a key bellwether in the Indian IT sector, with its options market activity providing valuable insights into investor sentiment. The current concentration of call options at a strike price modestly above the current market level reflects a cautiously bullish stance, tempered by recent price softness and sector underperformance. As expiry nears, market participants will be watching closely for signs of breakout or further consolidation, making TCS a stock to watch for both fundamental and technical traders alike.

Upgrade at special rates, valid only for the next few days. Claim Your Special Rate →