Put-call ratio is the one of the most deliberated term when the stock market moves up and down quickly. The Put-Call or the PC Ratio means how many put options are bought versus the call options. It is a simple formula to calculate. Just take the put options Open Interest or OI and divide it by the Open Interest (OI) of calls. The PCR is high when put volumes are higher than that of calls which signals a bearish sentiment. While, an increase in the call option as compared to put is an indicator of a bullish sentiment. The details can easily be seen in the Nifty options chain.
Nifty has been the range of 9850-9980 since past eight sessions, now the experts are speculating in which direction Nifty would move ahead. Looking at the derivatives, it is observed that the current upside remains to be at 10,030. Though the situation might take a turn as soon as there happens a change in the geopolitical scenario. Some of the market experts feel that any hike in the crisis of the North Korea might mean see the Nifty breaking below the 9,850-9,980 range on which it has stood for the past eight sessions. On similar lines, any low in the crisis in the North Korea may cause the Nifty breaking above and crossing the 10,000 mark.
As of now, there has been an upward high in the Nifty put-call ratio (PCR), which has provided quite a solace to the investors. The average of the PCR was found to be at 1.34 recently, which was only 1.18 in the last 23 sessions. The rise in the PCR clearly signifies that the traders are selling more of put options rather than the call options on the index. At the same time, it was also seen that there was much of the selling happening in the 9900 and 9850 puts.
It is not that a seller of the put option wishes that the market should fall beyond the strike sold minus the premium received as from the buyer which is opposite to what the buyer of the put option feels, but the seller of the put option is most of the times more stock market expert than the buyer which also means that the put option with a massive Open Interest get a more intense support of the market.
To cite an example, it is seen that the 9900 put option saw open positions increase to a huge 18.67 lakh shares which means 75 shares equals to one Nifty contract to 51.78 lakh shares recently. Now this is extremely high than the put with the largest base 9700 clocked in open positions 8.33 lakh shares to around 53 lakh shares over the same period.
You may check out live put call ratio values on BloombergQuint.
