Put/Call Ratio

The Put/Call Ratio (P/C Ratio) is a popular sentiment indicator, constructed from Call and Put option volume.  The P/C ratio is generally used as a contrarian signal when the indicator is at extreme levels.

Put/Call Ratio - P/C Ratio

The Put/Call Ratio (P/C Ratio) is a popular sentiment indicator, constructed from Call and Put option volume.  The P/C ratio is generally used as a contrarian signal when the indicator is at extreme levels.

 


Calculation of Put/Call Ratio

The Put/Call Ratio is calculated by dividing the daily or weekly volume of Put options by the daily or weekly volume of Call options.

Application of Put/Call Ratio

The Put/Call Ratio is typically used as a sentiment indicator. Large call volume often appears at market tops and large put volume at market bottoms.  Only CBOE equity options or all CBOE options should be used for this indicator. Put/Call Ratios of the indices like OEX and SPX are distorted and clouded by arbitrage and hedging and do therefore not always reflect true investor sentiment. The Put/Call Ratio is often smoothed using a 4-week Simple Moving Average.



2014 Total Exchange Put/Call Ratio published by CBOE

2014 Total Exchange Put/Call Ratio published by CBOE

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