Put Call Ratio

Put/Call ratio (PCR) :  is a popular derivative indicator, specifically designed to help traders gauge the overall sentiment (mood) of the market. The ratio is calculated either on the basis of options trading volumes or on the basis of the open interest for a particular period. If the ratio is more than 1, it means that more puts have been traded during the day and if it is less than 1, it means more calls have been traded. The PCR can be calculated for the options segment as a whole, which includes individual stocks as well as indices.

 How to Analyse Put Call Ratio ?

PCR as a Contrarian Indicator
Put / Call RatioInterpretation
If put-call ratio is increasing during correction in up-trending market and Implied volatility is fallingBullish Indication. It means the put writers are aggressively writing at dips.
If put-call ratio is steadily rising during the day along with Nifty spot.Bullish Indication.
If put-call ratio is increasing with sharp rise in Implied volatility while Nifty spot is near resistance level.Bearish Indication.
If put-call ratio decreases during down trending marketThis is a very bearish indication. It means call writers are aggressively writing at every rise or put writers are building bearish positions.

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