How the put call ratio is calculated
PCR = total put open interest ÷ total call open interest
Open interest (OI) is the number of option contracts still open. Add up the OI of all the puts in the chain, do the same for the calls, and divide. A PCR above 1 means more puts are open than calls; below 1, more calls. Some traders use only the strikes near the current price, or a single expiry. Whatever you choose, use the same method every day, or the readings won't be comparable. The ratio doesn't depend on the unit, as long as puts and calls are counted the same way.
| Example (made-up figures) | |
|---|---|
| Total put OI | 1,45,20,000 |
| Total call OI | 1,21,00,000 |
| PCR (open interest) | 1,45,20,000 ÷ 1,21,00,000 = 1.20 |
| Put OI added today | 18,30,000 |
| Call OI added today | 24,40,000 |
| PCR of today's change | 18,30,000 ÷ 24,40,000 = 0.75 |
Here the overall PCR is 1.20, but today more calls were added than puts, so the PCR of the change is only 0.75. The two can point different ways, which is why many traders watch both.
OI PCR and volume PCR
The OI ratio describes positions that are still open; the volume ratio describes what traded today, including positions opened and closed within the day. Volume PCR jumps around much more. The OI version is the one most Indian traders mean when they say "PCR".
Two opposite ways to read it
| Reading | Sentiment view | Contrarian view |
|---|---|---|
| PCR well above 1 | Traders are buying protection: bearish | Too many people are bearish, so the market may be oversold |
| PCR well below 1 | Traders are buying calls: bullish | Too many people are bullish, so the market may be overbought |
Both views are common, which tells you something: the PCR isn't a signal on its own. There's a second complication. Every open option has a buyer and a seller (the writer), so put OI is as much put writing as put buying. Many traders treat the writers as the better-funded side, and writers sell puts when they expect the market to hold up. So a high PCR is often read as support from put writers, the opposite of the sentiment view.
Many guides call readings above about 1.3 to 1.5 very high and below about 0.5 to 0.7 very low. Those levels shift with the market and the index, so the useful extremes are the ones in your index's own history. The calculator describes the reading rather than labelling it bullish or bearish.
Things that move the PCR without telling you much
- Expiry day. Nifty weekly options expire on Tuesdays (or the trading day before, if Tuesday is a holiday). As the nearest expiry approaches, its open interest builds up and then disappears, which can swing the whole-chain PCR.
- Hedging. Funds buy puts to protect stock portfolios. That adds put OI without anyone expecting a fall.
- Strikes far from the price. Cheap far-away options can carry a lot of OI. Using only the strikes near the price gives a cleaner picture.
How traders use it alongside other things
The PCR works best as context: where the open interest sits, how it changed today, and how that compares with the price move. The open interest analysis tool classifies the day's OI change and works out the max pain strike, and the implied volatility calculator shows how much movement the option prices expect. For the strategies themselves, see Nifty option selling and the payoff calculator.
This page uses invented numbers on purpose. It explains a tool; it doesn't comment on any day's market or suggest a trade.