Put-Call Ratio
The ratio of put volume (or open interest) to call volume, used as a market sentiment indicator.
Explanation
A high put-call ratio (above 1.0) suggests bearish sentiment; a low ratio (below 0.7) suggests bullish sentiment. Extreme readings can be contrarian indicators. The CBOE publishes equity and index put-call ratios daily. The ratio is analyzed using moving averages to smooth out daily noise.
Example
The CBOE equity put-call ratio hits 1.2, indicating elevated fear. Contrarian traders view this as a potential buying opportunity.