Advanced Put Call Ratio (PCR)Slide 1: Introduction to Advanced Put Call Ratio (PCR)
The Put Call Ratio (PCR) is a widely used sentiment indicator in options trading. It measures the volume or open interest of put options relative to call options. Advanced analysis of PCR helps traders gauge market sentiment—whether fear or greed is dominant—and anticipate potential reversals or continuations.
Slide 2: Basic Formula and Types
PCR Formula:
Volume-based PCR = Total Put Volume / Total Call Volume
Open Interest-based PCR = Total Put OI / Total Call OI
Interpretation:
PCR > 1: Bearish sentiment (more puts)
PCR < 1: Bullish sentiment (more calls)
Key Types:
Index PCR – NIFTY, BANKNIFTY PCR
Stock PCR – For individual stocks
Slide 3: Advanced Interpretation of PCR
1. Contrarian Indicator:
Very high PCR (e.g., >1.5): Indicates excess fear, potential reversal upward
Very low PCR (e.g., <0.6): Indicates extreme optimism, potential market correction
2. Trend Confirmation:
Stable rising PCR in uptrend = Confirmed strength
Falling PCR in downtrend = Confirmed weakness
3. Divergence Signal:
If prices rise but PCR also rises → underlying caution (hidden bearishness)
If prices fall but PCR drops → lack of fear (hidden bullishness)
Slide 4: Using PCR with Other Tools
Combine PCR with:
Volume & OI Data – To confirm trader positions
Implied Volatility (IV) – High PCR + high IV = fear-based overreaction
Support/Resistance Levels – Look for breakout confirmations
Technical Indicators – RSI, MACD, VWAP with PCR for enhanced edge
