Put-Call Ratio (PCR)
PCR compares the open interest (or volume) in put options with call options. It is widely watched and widely misread.
- PCR = put open interest รท call open interest (or the same with volume).
- Around 1 is balanced; the meaning of high and low readings depends on who holds the options.
- Extremes are more informative than everyday readings, and it is context, not a timing signal.
How it is calculated
Open-interest PCR divides the total open puts by the total open calls for an expiry. Volume PCR uses the contracts traded that day. A PCR of 1.04 means 104 puts are open for every 100 calls.
Two opposite readings
The textbook view is contrarian: many puts means many people are bearish or hedged, and crowded positioning often marks a low. In Indian index options, much of the open interest is held by option writers, so many traders read a high PCR as heavy put writing below the market, which they treat as support. Both views exist because the ratio alone cannot tell you who bought and who sold.
Using it sensibly
- Watch extremes and sharp changes rather than small daily moves.
- Look at where the open interest sits by strike, not only the total.
- Combine it with price trend and volatility, not on its own.
Common mistakes
- Treating PCR above 1 as a buy signal and below 1 as a sell signal.
- Comparing PCR across expiries with very different open interest.
- Ignoring that expiry-day positioning distorts the number.
Common questions
What is a good PCR for Nifty?
There is no single good value. Around 1 is balanced. Readings well above or below Nifty's usual range are more informative than the level itself.
Is high PCR bullish or bearish?
Traders disagree. Some read it as heavy put writing (support), others as heavy hedging. It is best used as context together with price and volatility.
What is the difference between OI PCR and volume PCR?
OI PCR uses all open contracts and changes slowly. Volume PCR uses the day's trading and is much noisier.