Advanced Put Call Ratio (PCR)

Slide 1: Introduction to Advanced Put Call Ratio (PCR)
The Put Call Ratio (PCR) is a widely used sentiment indicator in options trading. It measures the volume or open interest of put options relative to call options. Advanced analysis of PCR helps traders gauge market sentiment—whether fear or greed is dominant—and anticipate potential reversals or continuations.

Slide 2: Basic Formula and Types
PCR Formula:

Volume-based PCR = Total Put Volume / Total Call Volume

Open Interest-based PCR = Total Put OI / Total Call OI

Interpretation:

PCR > 1: Bearish sentiment (more puts)

PCR < 1: Bullish sentiment (more calls)

Key Types:

Index PCR – NIFTY, BANKNIFTY PCR

Stock PCR – For individual stocks

Slide 3: Advanced Interpretation of PCR
1. Contrarian Indicator:

Very high PCR (e.g., >1.5): Indicates excess fear, potential reversal upward

Very low PCR (e.g., <0.6): Indicates extreme optimism, potential market correction

2. Trend Confirmation:

Stable rising PCR in uptrend = Confirmed strength

Falling PCR in downtrend = Confirmed weakness

3. Divergence Signal:

If prices rise but PCR also rises → underlying caution (hidden bearishness)

If prices fall but PCR drops → lack of fear (hidden bullishness)

Slide 4: Using PCR with Other Tools
Combine PCR with:

Volume & OI Data – To confirm trader positions

Implied Volatility (IV) – High PCR + high IV = fear-based overreaction

Support/Resistance Levels – Look for breakout confirmations

Technical Indicators – RSI, MACD, VWAP with PCR for enhanced edge