The put-call ratio compares how many puts and calls are open or traded on an index or stock. It is one of the most quoted numbers in Indian market commentary, and also one of the easiest to misread.
Two ways to calculate it
- OI PCR = total put open interest ÷ total call open interest. It describes the positions that are outstanding.
- Volume PCR = put contracts traded ÷ call contracts traded, usually for the day. It describes today's activity and swings much more.
- Either can be calculated for one expiry or for all expiries combined, and for all strikes or a band around the index level. Different websites make different choices, which is why their PCR numbers often disagree.
A worked example
Here is a made-up option chain for one expiry, with open interest in thousands of contracts. The numbers are illustrative.
| Strike | Call OI | Put OI |
|---|---|---|
| 24,800 | 20 | 85 |
| 24,900 | 35 | 70 |
| 25,000 | 60 | 65 |
| 25,100 | 80 | 30 |
| 25,200 | 90 | 15 |
| Total | 285 | 265 |
OI PCR = 265 ÷ 285 = 0.93. A value below 1 means more call OI than put OI is open; above 1 means more put OI.
How PCR is usually interpreted
There are two opposite readings, which is the first hint that PCR is not a clean signal.
| Reading | High PCR (more puts) | Low PCR (more calls) |
|---|---|---|
| As a sentiment gauge | Traders are buying protection, so they are nervous | Traders are buying calls, so they are optimistic |
| As a writers' view | Writers are selling puts, so they expect the index to hold up | Writers are selling calls, so they expect the index to stay capped |
| As a contrarian signal | Too much fear, which some read as a sign a fall is overdone | Too much optimism, which some read as a sign a rise is overdone |
The same number can therefore support either a bullish or a bearish story. That is because OI does not show which side opened each contract: every put in the total has a buyer and a writer.
Why PCR is not a signal by itself
- Direction is unknown. Rising put OI could be new protective buying or new put writing, which mean opposite things.
- Hedges distort it. Institutions holding shares or futures often buy puts as a hedge, keeping index PCR structurally different from stock PCR.
- Expiry effects. Near expiry, OI moves quickly as positions roll, and the weekly contract can dominate the total.
- Definitions vary. Without knowing the expiries and strikes included, a PCR number cannot be compared across sources.
- There is no fixed threshold. Levels people call "high" or "low" change with the market regime.
Context, not a trigger
PCR can be a useful way to summarise how positioning is changing over days or weeks. Treating a single reading as a buy or sell trigger ignores everything it cannot tell you.
Index PCR vs stock PCR
Index options and stock options are used differently. A large share of index put buying comes from portfolio hedging by funds and institutions that own shares, so index PCR tends to sit at a different level from the PCR of individual stocks, where call buying by individual traders is often more common. Comparing a stock's PCR with the Nifty PCR, or one stock with another, mixes very different populations of traders.
Weekly vs monthly contracts
On Nifty, the nearest weekly expiry usually carries a large part of total open interest and an even larger part of volume. A PCR that includes all expiries is therefore heavily shaped by the current week, and it can change sharply on expiry day as that week's contracts disappear. A PCR calculated for one expiry at a time is easier to interpret, but it describes only that slice of the market.
A quick check
Before quoting any PCR figure, ask three questions: OI or volume, which expiries, and which strikes. If the source does not say, treat the number as a rough indication only.
Using PCR sensibly
- Look at the trend of PCR over time rather than one day's value.
- Check which expiries and strikes it includes.
- Read it alongside change in OI per strike, IV and the price action itself.
- Remember that it describes the market's positioning, not your own risk. Your position size and maximum loss matter more.
Examples use illustrative values, not current market data. This is general education, not investment advice.