Put call ratio charts are the go-to indicator for any F&O (Futures and Options) trader. This indicator helps gauge the market movement and devise strategies. Investors can study this metric to formulate option trading strategies. 

What is the Put Call Ratio (PCR)?

To go by its literal meaning, PCR is the ratio of the puts to the calls. Put call ratio indicator is a derivative metric used to predict the direction in which the market would move. 

When traders purchase more calls than puts, PCR signals a bullish sentiment. The opposite, that is, when the puts are relatively higher than the calls, the PCR is high, indicating that the market has a bearish sentiment.

HOW TO DEPICT PCR?

Refer to the below-mentioned points.

• When the put call ratio is less than 1, the investors buy more call options than the put options. This indicates a bullish trend. 
• When the PCR ratio is greater than 1, investors purchase more put options than call options. Hence, it is an indication of a bearish trend. 
• The final case indicates a neutral trend. In this scenario, the investors purchase the same number of put options and call options. The PCR value here becomes 1.

The put-call ratio can be significantly altered by changing either of them. The below table illustrates the put call ratio analysis.