Tech Mahindra Sees Heavy Put Option Activity Amid Mixed Market Signals

Put Option Activity Highlights

On the expiry date of 25 November 2025, Tech Mahindra’s put options at strike prices of ₹1,480 and ₹1,500 have attracted notable volumes. The ₹1,500 strike saw 5,783 contracts traded, generating a turnover of approximately ₹310.55 lakhs, while the ₹1,480 strike recorded 4,358 contracts with a turnover near ₹97.27 lakhs. Open interest figures stand at 819 and 793 contracts respectively, indicating sustained interest and potential positioning around these levels.

The underlying stock price at ₹1,509.10 places the current market value just above these strike prices, which may reflect a strategic choice by traders to hedge against potential downside risks or to speculate on a near-term price correction. The concentration of put activity close to the spot price often signals a market preparing for volatility or a cautious stance amid prevailing uncertainties.

Stock Performance and Market Context

Tech Mahindra’s stock has recorded a four-day consecutive gain, delivering a cumulative return of 5.96% over this period. On the day of analysis, the stock outperformed its sector by 2.25%, registering a 3.30% return compared to the sector’s 0.83% and the Sensex’s 0.26%. The intraday high touched ₹1,513.80, representing a 3.58% rise on the day.

Technical indicators show the stock trading above its 5-day, 20-day, 50-day, and 100-day moving averages, though it remains below the 200-day moving average. This positioning suggests short- to medium-term strength, tempered by longer-term resistance. However, investor participation appears to be moderating, with delivery volumes on 21 November falling by 41.47% against the five-day average, signalling a potential reduction in conviction among buyers.

Additionally, Tech Mahindra offers a dividend yield of 3.08% at the current price, which may appeal to income-focused investors amid market fluctuations. Liquidity metrics indicate the stock is sufficiently liquid to support trade sizes of up to ₹9.54 crores based on 2% of the five-day average traded value, facilitating active trading and hedging strategies.

Interpreting the Put Option Interest

The heavy put option volumes at strike prices near the current market value suggest a nuanced market outlook. Traders may be employing these options as a hedge against potential declines, especially given the stock’s recent rally and proximity to resistance levels. The open interest figures reinforce the idea that these positions are not merely speculative but could represent deliberate risk management.

Put options provide investors with the right to sell shares at predetermined prices, serving as insurance against price drops. The concentration of activity at ₹1,480 and ₹1,500 strikes indicates that market participants are particularly focused on these thresholds as critical support levels or potential pivot points.

Expiry patterns also play a role in shaping option activity. With the 25 November expiry approaching, traders often adjust their positions to manage exposure, which can lead to heightened volumes and turnover in options close to the money. This dynamic is evident in Tech Mahindra’s derivatives market, where the interplay of bullish price action and bearish option positioning creates a complex trading environment.

Sector and Market Capitalisation Context

Operating within the Computers - Software & Consulting sector, Tech Mahindra holds a large-cap market capitalisation of approximately ₹1,47,047 crores. This stature provides the stock with considerable institutional interest and liquidity, factors that contribute to active options trading and diverse market strategies.

While the sector has seen moderate returns, Tech Mahindra’s relative outperformance highlights its prominence among peers. However, the mixed signals from price momentum and option market activity underscore the importance of cautious analysis for investors considering exposure to this stock.

Investor Considerations and Outlook

Investors analysing Tech Mahindra should weigh the recent price gains against the evident hedging activity in the options market. The presence of substantial put option interest near current price levels may indicate expectations of volatility or a potential pullback in the short term.

Moreover, the decline in delivery volumes suggests a possible moderation in buying enthusiasm, which could influence price dynamics in the coming sessions. The dividend yield of 3.08% adds an income dimension to the stock’s profile, potentially attracting investors with a preference for yield amid market uncertainty.

Given the stock’s liquidity and active derivatives market, traders have multiple avenues to express views or manage risk. The interplay between spot price movements and option market positioning will remain a key factor to monitor as the expiry date approaches.

Conclusion

Tech Mahindra’s recent market activity presents a layered picture. While the stock has demonstrated strength relative to its sector and broader indices, the surge in put option trading near the current price level signals a degree of caution among market participants. This duality reflects a market balancing optimism with prudent risk management, underscoring the importance of comprehensive analysis for investors navigating this large-cap technology stock.

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