PCR : Put Call Ratio in Options Trading

The put-call ratio is a popular technical indicator used by traders and investors to assess the sentiment of the market. It is calculated by dividing the total number of outstanding put options by the total number of outstanding call options.



A put option is a contract that gives the holder the right, but not the obligation, to sell an underlying asset at a specified price (strike price) within a specified period of time. A call option is a contract that gives the holder the right, but not the obligation, to buy an underlying asset at a specified price (strike price) within a specified period of time.


The put-call ratio is used to gauge whether traders and investors are more bullish or bearish on the market. A ratio above 1 may indicate that traders and investors are more bearish on the market, while a ratio below 1 may indicate that traders and investors are more bullish on the market.



However, it's important to note that the put-call ratio should not be used as a standalone indicator for making trading decisions, and should be used in combination with other technical and fundamental indicators. It's also important to understand that the put-call ratio can vary depending on the underlying asset being traded and the timeframe being analyzed.



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