what is option chain pcr ?The **Option Chain PCR (Put-Call Ratio)** is a ratio used by traders and analysts to gauge market sentiment and potential price direction. It is calculated by dividing the total open interest (OI) of **puts** by the total open interest of **calls** in a particular market or stock.
### Formula for PCR:
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### What does PCR indicate?
- **PCR > 1**: This suggests that there are more open interest in puts than calls, which is generally considered a **bearish** signal, indicating that traders expect the price to decline.
- **PCR < 1**: This suggests that there are more open interest in calls than puts, which is generally considered a **bullish** signal, indicating that traders expect the price to rise.
- **PCR = 1**: This indicates an **equilibrium** where the market is neutral, with an equal amount of calls and puts.
### How it's used:
- **Sentiment Indicator**: Traders use the PCR to determine the overall sentiment of the market. A rising PCR might suggest that there is growing bearish sentiment, while a declining PCR might suggest increasing bullish sentiment.
- **Market Extremes**: When the PCR becomes too extreme (either very high or very low), it could signal a reversal, indicating that the market might be overbought or oversold.
### Example:
If the open interest for put options in a stock is 100,000 contracts and for call options is 200,000 contracts, the PCR would be:
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This would typically indicate a **bullish sentiment**, as more traders are interested in calls than puts.
