Put-Call RatioPCR
The put-call ratio divides the volume (or open interest) of puts by that of calls. A high ratio shows heavy demand for protection; traders often read extremes as contrarian sentiment signals.
Options traders reveal their fears and hopes with their money: puts profit from falls, calls from rises. Dividing one by the other gives the put-call ratio, one of the best-known gauges of market sentiment. It is usually read against the crowd — when nearly everyone is buying protection, the selling may be close to done. This entry explains the calculation, the main versions and how to read extremes.
- Category
- Derivatives
- Reading time
- 4 min
- Also called
- Put/call ratio, Put call ratio
- Updated
The put-call ratio in plain words
Every option gives its buyer a right, not an obligation: a call to buy and a put to sell a set amount of an asset at a fixed price by a set date.1
The ratio is simply put volume divided by call volume; above 1 means more puts than calls traded, below 1 the reverse.2
Puts are bought to hedge against falls or to bet on them, calls to hedge against rises or bet on them, so the mix reveals the mood.2
It is normally used as a contrarian signal: very high readings suggest excessive fear, very low readings excessive optimism.2
How to use the put-call ratio, step by step
Pick the version
Equity, index or total ratio — they behave differently (see below).
Smooth it
Daily readings are noisy; use a moving average. See Moving Average.
Find the extremes
Compare with the ratio's own recent range, not a fixed number.
Read it contrarily
Extreme fear can mark lows; extreme greed can mark highs.
Confirm with price
Wait for the market to turn before acting. See Confluence.
Compare with other gauges
Combine with the VIX and breadth. See Market Sentiment.
Worked examples
Example 1 — Calculating the ratio
0.80On one day 1.2 million puts and 1.5 million calls trade.
| Put-call ratio | 1.2 ÷ 1.5 = 0.80 |
| Reading | More calls than puts |
Below 1, call volume exceeds put volume.2
Example 2 — A fear spike
Possible lowAfter a sharp sell-off, the equity ratio's 10-day average climbs to the top of its yearly range at 0.95, against a typical 0.65.
| Typical level | 0.65 |
| Now | 0.95 — extreme |
| Contrarian read | Fear may be overdone |
Contrarians turn bullish when too many traders are bearish, but the extremes shift over time.2
Example 3 — Hedging distorts the index ratio
Not a sell signalThe index put-call ratio sits above 1.2 for weeks while stocks keep rising.
| Index ratio | > 1.2 |
| Market | Still rising |
Many index puts are bought as routine portfolio hedges, so the index ratio tends to run higher and says less about fear than the equity ratio.
Three Cboe put-call ratios
| Aspect | Covers | Typical use |
|---|---|---|
| Equity ($CPCE) | Options on single stocks | Best gauge of speculative mood |
| Index ($CPCI) | Options on major indexes | Skewed by institutional hedging |
| Total ($CPC) | Equity plus index | Broad overview |
| Single stock | One company's options | Event positioning. See Open Interest |
How traders use the put-call ratio
Contrarian timing
Spotting extremes of fear and greed.
Confirming a trend
A gradually rising ratio can confirm weakening sentiment.
Event watch
Watching options flow before earnings. See Earnings.
Context for the VIX
Both gauge fear from options markets. See Implied Volatility.
Advantages and disadvantages
Advantages
- Simple to calculate and widely published.
- Shows sentiment from traders putting money at risk.
- Useful for spotting crowd extremes.
Disadvantages
- Noisy day to day.
- Extreme levels shift over time.
- Hedging flows can distort it.
Going deeper
Read as far as you need. Each level builds on the one before it.
Which ratio to watch
Beginner
Cboe publishes an equity ratio for single-stock options, an index ratio for options on the Dow, Nasdaq, Russell 2000, S&P 500 and S&P 100, and a total ratio combining them.2
Smoothing the signal
Intermediate
Because daily readings jump around, chartists apply moving averages and other indicators to smooth the ratio before looking for signals.2
Volume versus open interest
Advanced
Volume shows today's activity; open interest shows positions still open. A volume spike in puts that never adds to open interest may be short-term hedging rather than a lasting bet. See Open Interest.
Common mistakes
Using a fixed threshold
What counts as extreme changes over the years.
Reading one day
Use averages and wait for confirmation.
Treating index puts as fear
Much of it is routine hedging.
Fighting a strong trend
Extremes can persist before the market turns.
Check your understanding
Test yourself before moving on. Each answer comes with an explanation.
Key points to remember
- Put-call ratio = put volume ÷ call volume.
- Above 1 means more puts than calls.
- It is mostly a contrarian sentiment gauge.
- The equity version is cleaner than the index version.
- Smooth it and judge extremes against its own history.
Frequently asked questions
What is a normal put-call ratio?
Is a high ratio bearish?
Where can I see it?
Further learning
- Options
Calls and puts explained.
- Fear and Greed
Another sentiment gauge.
- Contrarian Trading
How to trade against the crowd.
- Open Interest
Positions behind the volume.
Sources
This article is written in our own words. The sources below support the specific facts, rules and figures marked with a number in the text. Links open the original publisher’s page.
- FINRA. Options (opens in a new tab) Checked .
- StockCharts ChartSchool. Put/Call Ratio (opens in a new tab) Checked .
Read more elsewhere
- Trading Metrics (our sister site): Put/Call Ratio (opens in a new tab)
Educational content, not financial advice. Examples use hypothetical prices and simplified costs; actual fees, margin rules and regulations vary by broker, market and country. Trading Metrics is our sister site, under the same ownership; we are not affiliated with any other publisher linked above. Last reviewed . Report an error or request a source credit.