Put-Call Ratio (PCR): A Complete Guide to Understanding Market Sentiment

What is the Put-Call Ratio (PCR)?

The Put-Call Ratio (PCR) is a widely used indicator in the stock and options market that helps traders measure market sentiment. It compares the trading volume of put options to call options:

PCR = Put Options ÷ Call Options

• Put options give the right to sell an asset (often used as bearish bets).

• Call options give the right to buy an asset (often used as bullish bets).

Types of Put-Call Ratios

There are different ways traders use PCR depending on what data they analyze:

1. PCR Volume
   
   

• Based on the trading volume of puts vs calls.

• Best for short-term sentiment analysis.
  
  

2. PCR Open Interest
   
   

• Based on outstanding contracts (open interest) of puts vs calls.

• Useful for identifying longer-term positioning.
  
  

3. Index PCR vs Stock PCR
   
   

• Index PCR: Sentiment for the overall market (Nifty, S&P 500, etc.).

• Stock PCR: Sentiment for individual stocks.

Use PCR as a “sentiment compass” alongside your technical and fundamental analysis. When markets look overly greedy or fearful, PCR can alert you to prepare for the opposite move.