PCR Part 2

The Put-Call Ratio (PCR) is a popular sentiment indicator in options trading that gauges market mood by dividing the volume or open interest (OI) of put options by that of call options. A PCR above 1 suggests bearish sentiment (more puts) but can act as a contrarian buy signal at extremes, while a PCR below 1 suggests bullish sentiment.

Common Interpretations:
High PCR (e.g., >1.0): Generally indicates bearish market sentiment (more puts), often seen during market fear.
Low PCR (e.g., <0.7): Typically indicates bullish market sentiment (more calls), common during market optimism.
Extreme High/Low: An extremely high PCR (e.g., >1.4) might be used as a buy signal (market panic), while an extremely low PCR (e.g., <0.5) could indicate a potential sell signal (market euphoria).