What is put call ratio?

The Put Call Ratio (PCR) is a widely used indicator in the stock market that helps investors gauge overall market sentiment. It is calculated by dividing the total number of traded put options by the total number of call options. A high PCR value (greater than 1) typically indicates bearish sentiment, suggesting that more traders are buying puts to hedge or bet against the market. On the other hand, a low PCR value (less than 1) signals bullish sentiment, as more call options are being purchased in anticipation of rising prices. Traders and analysts use the Put Call Ratio to understand crowd behavior and to spot potential trend reversals or confirmation of existing trends.