Tata Steel Sees Heavy Put Option Activity Amid Mixed Market Signals

Robust Put Option Volumes Signal Bearish Hedging

Data from the derivatives market reveals that Tata Steel Ltd’s put options expiring on 27 January 2026 have attracted considerable attention. The most actively traded put strikes are at ₹170, ₹175, and ₹180, with the number of contracts traded standing at 1,177, 1,595, and 1,205 respectively. This translates into a combined turnover exceeding ₹591 lakhs, underscoring the heightened interest in downside protection or speculative bearish bets.

Open interest figures further corroborate this trend, with the ₹170 strike showing an open interest of 2,127 contracts, ₹175 at 1,890, and ₹180 at 1,244. These levels indicate that traders are positioning themselves for potential downside risks or are actively hedging existing long exposures as the stock price hovers around ₹179.15.

Stock Performance and Market Context

Tata Steel Ltd has been on a steady upward trajectory, gaining 6.14% over the last three trading sessions. The stock opened with a gap-up of 2.39% on the latest trading day and touched an intraday high of ₹181.40, just 4.14% shy of its 52-week peak of ₹186.94. Despite this strong performance, the stock slightly underperformed its sector, which gained 2.42%, by 0.52% on the day.

Technical indicators remain bullish, with Tata Steel trading above its 5-day, 20-day, 50-day, 100-day, and 200-day moving averages. This technical strength is complemented by rising investor participation, as delivery volumes surged by 32.14% compared to the five-day average, reaching 1.73 crore shares on 30 December 2025. The stock’s liquidity profile supports sizeable trades, with an average traded value sufficient to accommodate transactions worth ₹9.67 crore comfortably.

Mojo Score Upgrade Reflects Positive Outlook Despite Put Activity

MarketsMOJO’s latest assessment upgraded Tata Steel Ltd’s Mojo Grade from Hold to Buy on 9 December 2025, reflecting improved fundamentals and technicals. The stock’s Mojo Score stands at a robust 77.0, signalling strong buy-side momentum. The market cap grade remains at 1, confirming its status as a large-cap heavyweight with a market capitalisation of ₹2,19,398 crore.

While the put option activity might suggest bearish sentiment, it is important to interpret this within the broader context of hedging strategies. Institutional investors often use put options to protect gains in a rising market, especially when the stock is near all-time highs. This dynamic can create a paradox where bullish fundamentals coexist with elevated put volumes.

Expiry Patterns and Strike Price Concentration

The concentration of put option interest at the ₹170 to ₹180 strike range is particularly telling. With the current underlying price at ₹179.15, these strikes are close to at-the-money or slightly out-of-the-money, making them attractive for both hedgers and speculators. The January 27 expiry date is the nearest monthly expiry, which typically sees heightened activity as traders adjust positions ahead of contract settlement.

Open interest build-up at these strikes suggests that market participants are bracing for potential volatility or a price correction in the near term. However, the stock’s recent gains and technical strength imply that any downside may be limited or short-lived, reinforcing the notion that put buying is largely protective rather than outright bearish.

Sectoral and Broader Market Comparison

Within the ferrous metals sector, Tata Steel’s performance has been commendable, though it slightly lagged the sector’s 2.44% one-day return with a 2.09% gain. The broader Sensex index posted a modest 0.17% increase, highlighting Tata Steel’s relative strength amid mixed market conditions.

The steel and sponge iron segment has been buoyed by robust demand and improving commodity prices, factors that underpin Tata Steel’s positive outlook. However, the presence of active put option trading indicates that investors remain vigilant about potential headwinds such as raw material cost fluctuations, regulatory changes, or global economic uncertainties.

Investor Takeaway: Balancing Optimism with Caution

For investors, the current scenario presents a nuanced picture. Tata Steel Ltd’s upgrade to a Buy rating and strong technicals support a bullish stance, yet the heavy put option activity signals prudent risk management. Those holding long positions may consider protective puts as insurance against short-term volatility, while new entrants should monitor strike price levels and expiry dynamics closely.

Given the stock’s liquidity and market cap, Tata Steel remains a viable candidate for both strategic and tactical trades. The interplay between rising prices and elevated put interest exemplifies the sophisticated hedging strategies employed by market participants in today’s environment.

Conclusion

Tata Steel Ltd’s derivatives market activity ahead of the January 2026 expiry reveals a complex blend of optimism and caution. While the stock enjoys strong fundamentals and a recent upgrade to Buy, the surge in put option volumes at key strike prices suggests that investors are actively managing downside risks. This duality highlights the importance of a balanced investment approach, combining fundamental conviction with tactical hedging to navigate potential market fluctuations.

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