1. What is Put Call Ratio?

The Put Call Ratio (PCR) is a popular market sentiment indicator that compares the trading volume of put options to call options. It helps investors gauge overall market sentiment - whether investors are bearish or bullish.

2. How Does the Calculator Work?

The calculator uses the Put Call Ratio formula:

Where:

• \( Put Volume \) — Total number of put options traded
• \( Call Volume \) — Total number of call options traded

Explanation: The ratio shows how many puts are traded for every call. Values above 1 indicate more puts than calls (bearish sentiment), while values below 1 indicate more calls than puts (bullish sentiment).

3. Importance of PCR Calculation

Details: PCR is widely used by traders to identify potential market turning points. Extreme high values may indicate oversold conditions, while extreme low values may indicate overbought conditions.

4. Using the Calculator

Tips: Enter put volume and call volume in contracts. Both values must be positive, and call volume cannot be zero.

5. Frequently Asked Questions (FAQ)

Q1: What is a normal PCR value?
A: Typically ranges between 0.7 and 1.0 for equity options. Values significantly outside this range may indicate extreme sentiment.

Q2: How is PCR used in trading?
A: Traders use PCR as a contrarian indicator - high PCR may signal buying opportunities, while low PCR may signal caution.

Q3: Should I use total volume or open interest?
A: Volume-based PCR reflects current trading activity, while open interest-based PCR reflects overall market positioning.

Q4: What time frame should I use?
A: Daily PCR shows short-term sentiment, while moving averages (e.g., 10-day) smooth out noise and show trends.

Q5: Are there limitations to PCR?
A: PCR should be used with other indicators as it can remain extreme during strong trends, and doesn't distinguish between hedging and speculative activity.