The put/call ratio
The put/call ratio measures how much investors are willing to pay for options that give them the right to sell an underlying asset at a set price in the future. The higher the put/call ratio, the less bullish investors are on the market.
In conclusion, the put/call ratio is a useful tool for understanding how investors feel about the current state of the market.
The put/call ratio is calculated by dividing the total number of put options sold by the total number of call options purchased. This ratio is then multiplied by 100 to arrive at a percentage. A positive value indicates that investors are more bearish than bullish. A negative value indicates that investors are bullish than bearish.
A put option gives the buyer the right to sell shares of stock at a fixed price in the future. A call option gives the holder the right to purchase shares of stock at a certain price in the future. Investors use these options to hedge against losses by selling puts or buying calls. If the market goes down, investors will sell puts because they expect the price of the stock to go up. This means that the put/call ratio will be lower than normal. On the other hand, if the market goes up, investors will buy calls because they expect the price to go down. This means that the ratio will be higher than normal.
How to Calculated the Put/Call Ratio
PCR (Based on OI) = Total Put open interest / Total Call open interest
PCR (Based on Volume) = Put trading volume / Call trading volume
To calculate the Put/Call ratio, first, find the total number of calls (buy orders) and puts (sell orders). Then divide the number of puts by the number of calls. This will give you the Put/Call ratio.