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Put Call Ratio Meaning & Market Signals

The Put Call Ratio (PCR) is a widely used indicator in the stock and options market that helps traders assess overall market sentiment. It is calculated by dividing the open interest or trading volume of put options by that of call options. A high Put Call Ratio indicates that more investors are buying put options, signaling a bearish outlook, while a low ratio suggests more call option buying, indicating a bullish sentiment.

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Put Call Ratio Meaning & Market Signals

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  1. Put Call Ratio The Put Call Ratio is a simple indicator used in the options market to gauge overall market sentiment. It's calculated by dividing the number of put options traded by the number of call options. 1 High Ratio A high ratio indicates a greater demand for put options, suggesting investors are bearish and expecting a market decline. 2 Low Ratio A low ratio indicates a greater demand for call options, suggesting investors are bullish and expecting a market rise. 3 Ratio Trends Changes in the ratio over time can be more valuable than the absolute value, showing shifts in investor sentiment and potential market direction. Market Sentiment The Put Call Ratio provides a simple measure of overall investor sentiment, highlighting whether investors are bullish or bearish and helping to understand potential market direction.

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