Put-Call Ratio Sentiment

The put-call ratio is a derivative-specific sentiment indicator calculated by dividing the trading volume of put options by the trading volume of call options. A rising ratio indicates that investors are purchasing more protection or betting on downside movement, which is interpreted as a bearish sentiment signal.

Conversely, a falling ratio suggests a preference for call options, indicating bullish sentiment. In options trading, this ratio is used to identify extreme positioning that may require a reversal.

When the ratio reaches historically high levels, it can suggest that the market is oversold and a relief rally is imminent. It provides a window into how institutional and professional traders are hedging their portfolios against future market volatility.