Tata Steel Sees Heavy Put Option Activity Amid Bullish Price Momentum

Robust Put Option Volumes Highlight Investor Caution

The most active put options for Tata Steel Ltd are concentrated at the ₹200 strike price, with 6,769 contracts traded, generating a turnover of approximately ₹1,470.57 lakhs. Open interest stands at 1,478 contracts, indicating sustained interest in downside protection or speculative bearish bets. This activity is particularly significant given the underlying stock price of ₹202.15, which is marginally above the strike price, suggesting that investors are positioning for a potential pullback or increased volatility in the near term.

Expiry Patterns and Market Implications

The expiry date of 24 February 2026 is just over two weeks away, a period often marked by heightened option activity as traders adjust their positions ahead of contract settlements. The concentration of put options at the ₹200 strike price, close to the current market price, reflects a strategic choice by market participants to hedge existing long positions or speculate on a moderate decline. This pattern aligns with typical risk management practices in the ferrous metals sector, which remains sensitive to global commodity price fluctuations and domestic demand dynamics.

Stock Performance and Technical Context

Tata Steel Ltd has outperformed its sector today, registering a 2.46% gain compared to the ferrous metals sector’s 0.84% rise and the Sensex’s 0.54% increase. The stock opened with a gap up of 2.51% and touched an intraday high of ₹206.34, marking a fresh 52-week peak. Notably, Tata Steel is trading above its 5-day, 20-day, 50-day, 100-day, and 200-day moving averages, signalling strong technical momentum. However, the weighted average price indicates that more volume was traded near the lower end of the day’s price range, hinting at some selling pressure despite the overall upward trend.

Declining Investor Participation Raises Questions

While the stock’s price action appears robust, delivery volumes tell a different story. On 6 February, delivery volume stood at 76.36 lakh shares but has since declined by 49.47% against the five-day average delivery volume. This falling investor participation could imply that the recent price gains are driven more by short-term traders than long-term holders, potentially increasing the risk of a correction. The liquidity profile remains healthy, with the stock capable of supporting trade sizes up to ₹9.67 crore based on 2% of the five-day average traded value, ensuring that active traders can execute sizeable orders without significant price impact.

Mojo Score and Rating Dynamics

Tata Steel Ltd holds a Mojo Score of 75.0, reflecting a strong buy recommendation from MarketsMOJO’s proprietary scoring system. The company’s Mojo Grade was recently downgraded from Strong Buy to Buy on 1 January 2026, signalling a slight moderation in bullish sentiment but maintaining a positive outlook. The market capitalisation grade is 1, underscoring its status as a large-cap stock with significant institutional interest and market influence.

Sectoral and Market Comparisons

Within the ferrous metals sector, Tata Steel’s performance today notably outpaced the sector average, which rose by 0.84%. The Sensex benchmark index gained 0.54%, further highlighting Tata Steel’s relative strength. This outperformance is particularly relevant given the sector’s sensitivity to global steel demand, raw material costs, and geopolitical factors affecting supply chains. Investors appear to be balancing optimism about Tata Steel’s operational prospects with caution, as evidenced by the elevated put option activity.

Investor Strategies: Hedging and Speculation

The surge in put option volumes at the ₹200 strike price suggests a dual strategy among market participants. Long-term investors may be employing puts as a hedge against potential downside risks, especially given the recent price rally and stretched valuations. Meanwhile, speculative traders might be betting on a near-term correction or increased volatility, leveraging the leverage and limited risk profile that options provide. This mixed positioning reflects the complex market environment facing Tata Steel, where positive fundamentals coexist with external uncertainties.

Outlook and Key Considerations

Looking ahead, the expiry on 24 February 2026 will be a critical juncture for Tata Steel’s price trajectory. Should the stock maintain levels above ₹200, put option holders may face losses, potentially leading to unwinding of bearish positions and renewed buying interest. Conversely, a dip below this strike price could trigger further downside pressure as protective puts gain value and speculative shorts intensify. Investors should closely monitor volume patterns, open interest changes, and broader market cues to gauge the evolving sentiment.

Conclusion: Balancing Optimism with Prudence

Tata Steel Ltd’s recent price strength and technical momentum are encouraging signs for investors bullish on the ferrous metals sector. However, the pronounced increase in put option activity at a strike price just below the current market level signals that many market participants are hedging against or anticipating a correction. This dynamic underscores the importance of a balanced investment approach, combining fundamental conviction with risk management strategies.

Given the stock’s large-cap status, strong liquidity, and positive Mojo Score, Tata Steel remains an attractive investment candidate. Yet, the evolving options market data suggests that investors should remain vigilant to shifts in market sentiment and be prepared to adjust their positions accordingly as the 24 February expiry approaches.

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