putcallratio

Put-call ratio (PCR) is a widely used market sentiment indicator that compares the trading activity of put options to that of call options. It can be calculated using either volume or open interest and is commonly reported for individual stocks, indices, and broader markets.

Two common variants exist: volume-based PCR, defined as puts volume divided by calls volume, and open-interest-based PCR, defined as puts open interest divided by calls open interest. Some sources report both, and the choice of variant affects interpretation since volume reflects near-term activity while open interest reflects longer-term positioning.

Interpretation of PCR is context-dependent. A higher ratio indicates more puts relative to calls, generally signaling bearish sentiment or hedging activity, while a lower ratio suggests bullish sentiment. Extreme readings can be read as contrarian signals, but the meaning varies with market conditions, time frame, and whether the analysis references equities or index options.

Usage and limitations: PCR is used alongside other indicators to gauge sentiment and potential breadth of a move. It is not predictive on its own and can be distorted by hedging, option-writing strategies, or structural market changes. Differences between volume-based and open-interest-based PCR can yield conflicting readings, so analysts typically specify the variant and data source.

Variants and context: there are separate PCRs for equities and for indices. Thresholds are not universal and depend on the market, period, and data provider. Some practitioners also report inverted forms (such as call-to-put ratios) or normalize values, so users should note the convention used.