Definition
Put-Call Ratio (PCR)
The put-call ratio compares the volume or open interest of puts versus calls to gauge market sentiment.
PCR is calculated by dividing put open interest (or volume) by call open interest. A PCR above 1 means more puts than calls — often read as bearish positioning, though contrarians see an extreme high PCR as a bullish bottom signal. A very low PCR can flag excessive optimism.
On the NSE, traders track the Nifty and Bank Nifty PCR through the day as a sentiment thermometer. Because option sellers dominate Indian index markets, PCR is often interpreted from the writers' point of view — heavy put writing pushes PCR up and is taken as a sign sellers expect support to hold.
Related terms
- Open InterestOpen interest is the total number of outstanding futures or options contracts that have not yet been closed.
- Option ChainAn option chain is the full table of all available call and put strikes for a contract, with their prices and data.
- Max PainMax pain is the strike price at which the largest number of option buyers would lose money on expiry.
Plain-English explainer from The Dispatch Investors Encyclopedia. General information, not financial advice.