Tata Consultancy Services Sees Heavy Put Option Activity Ahead of February Expiry

Put Option Activity Highlights

On 3 February 2026, TCS recorded the most active put option contracts among large-cap stocks, with 4,960 contracts traded at the ₹3,200 strike price expiring on 24 February 2026. This activity generated a turnover of approximately ₹415.6 lakhs, underscoring significant investor interest in downside protection or speculative bearish bets. Open interest at this strike stands at 2,899 contracts, indicating sustained positioning rather than transient trades.

The underlying stock price of TCS was ₹3,220.5 at the time, just above the put strike price, suggesting that investors may be bracing for potential downside or volatility in the near term. The concentration of put activity at this strike price, close to the current market level, often points to a strategic hedge against declines or a speculative stance anticipating a correction.

Stock Performance and Market Context

Despite the surge in put option interest, TCS’s stock performance on the day showed a mixed picture. The stock opened with a gap up of 5.69%, reaching an intraday high of ₹3,350, reflecting strong buying interest. However, it underperformed its sector by 0.33%, with a daily return of 1.62% compared to the sector’s 1.83% and the Sensex’s 2.83% gains. This relative underperformance may have contributed to the cautious sentiment expressed through put options.

Technically, TCS remains in a robust uptrend, trading above its 5-day, 20-day, 50-day, 100-day, and 200-day moving averages. This technical strength contrasts with the increased put activity, suggesting that some investors are hedging long positions or speculating on a near-term pullback despite the overall bullish trend.

Investor participation appears to be waning, with delivery volumes falling by 20.4% against the five-day average, registering 16.46 lakh shares on 2 February. This decline in delivery volume could indicate reduced conviction among buyers, potentially prompting some to seek downside protection via puts.

Fundamental and Valuation Considerations

TCS is a large-cap heavyweight in the Computers - Software & Consulting sector, boasting a market capitalisation of ₹11,61,478 crores. The company currently holds a Mojo Score of 57.0 with a Mojo Grade of Hold, upgraded from Sell on 22 April 2025. This upgrade reflects an improvement in the company’s fundamentals or market positioning, though the Hold rating suggests cautious optimism rather than outright bullishness.

The stock offers a relatively attractive dividend yield of 3.44%, which may appeal to income-focused investors amid market volatility. Liquidity remains strong, with the stock capable of handling trade sizes up to ₹18.55 crores based on 2% of the five-day average traded value, ensuring ease of entry and exit for institutional participants.

Interpreting the Put Option Surge

The heavy put option volume at the ₹3,200 strike price, just below the current market price, suggests that investors are either hedging existing long positions or speculating on a near-term correction. Given the stock’s recent gap-up opening and intraday high, the put activity may be a defensive measure against profit-taking or broader market uncertainties.

Put options serve as insurance for long holders, allowing them to limit downside risk while maintaining upside exposure. The open interest of nearly 2,900 contracts at this strike indicates that this is not a fleeting phenomenon but a deliberate positioning strategy. The expiry date of 24 February 2026 is just three weeks away, which may imply that investors expect volatility or a price test around this timeframe.

Sector and Market Comparisons

Within the Computers - Software & Consulting sector, TCS’s performance has been steady but slightly lagging the sector average on the day. The sector’s 1.83% gain outpaced TCS’s 1.62%, while the broader Sensex surged 2.83%. This relative underperformance, combined with the put option interest, may reflect sector rotation or profit-booking by investors reallocating capital.

Market participants should also note that TCS’s Mojo Grade upgrade from Sell to Hold in April 2025 signals a stabilisation in the company’s outlook, though it stops short of a Buy rating. This nuanced stance aligns with the mixed signals from price action and options activity, suggesting a cautious market environment.

Outlook and Investor Implications

For investors, the current put option activity in TCS highlights the importance of monitoring option market data as a barometer of sentiment and risk management. While the stock’s technicals remain strong, the surge in puts near the ₹3,200 strike price ahead of expiry suggests that downside risks are being actively managed.

Long-term investors may view this as an opportunity to reassess their risk exposure and consider protective strategies, especially given the stock’s high market capitalisation and sector leadership. Traders might interpret the put volume as a signal to watch for potential volatility or a pullback in the coming weeks.

Conclusion

The pronounced put option activity in Tata Consultancy Services Ltd. ahead of the 24 February 2026 expiry underscores a cautious market stance despite the stock’s recent gains and technical strength. Investors appear to be hedging against potential near-term downside or volatility, with significant open interest concentrated at the ₹3,200 strike price.

While the company’s fundamentals remain solid and its Mojo Grade has improved to Hold, the mixed signals from price action and options data suggest that market participants should remain vigilant. Monitoring option flows alongside technical and fundamental indicators will be crucial for navigating TCS’s stock in the weeks ahead.

Overall, the current environment calls for a balanced approach, combining appreciation of TCS’s sector leadership and dividend yield with prudent risk management strategies to mitigate potential downside risks.

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