We are here providing you the meaning of PCR and key takeaways of it and implications of PCR which will help you become a better trader for life.
The put-call ratio is the ratio of the trading volume of put options to call options and is used as an indicator of investor sentiment in the markets.
- Put-call ratios are indicators of relative trading volumes of put options to call options in the options market.
- A put-call ratio above 1 is considered to be an indicator of a selloff while a put-call ratio below 1 is an opportunity to buy.
- Some traders use the put-call ratio as a contrarian indicator, buying when the ratio is above 1 and selling when the ratio is below that figure.
1. Markets Rallying & PCR Rallying:- If the PCR is rallying it means Put Volumes is exceeding the Call Volumes and people are getting bearish and shorting the stocks & Indices. With rising markets, we can say that people are selling into the strength and they don't believe in rallies. This is a sign that the rally will continue.
2. Markets Rallying & PCR Falling:- Contrary to the above here people are believing the rally and chasing it. Here is the sign of market reversal.
3. Markets Falling & PCR Rallying:- Increase in PCR along with fall in markets shows the panic. Here people are scared and panicking. A sign that the short-term bottom is formed and the decline is about to end.
4. Markets falling & PCR Falling:- Here people are bullish and using the market's weakness as buying opportunities. A sign that the fall in markets will continue.
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