Most of the experts uses Put Call Ratio based on Open Interest (PCR OI) as in Derivatives OI has more weightage than traded volumes because of its leverage ...UnderstandingPutCallRatio-HowtoCalculatePutCallRatio|MotilalOswalUnderstandingPutCallRatio-HowtoCalculatePutCallRatio|MotilalOswalOpenanAccountLearnBlogDetailsPredictingMarketMoveswithPutCallRatioHowtouseput/callratiostopredictmarketsDerivativesAnalystusesmanyindicatorsandtoolstounderstandthemarketmovementlikeOpenInterest,OptionConcentration,Volatility,VolatilitySmile/Skew,Rollover,RolloverCost,Basis,CostofCarryandPutCallRatio.AlltheseareimportantindicatorswhilePutCallRatiohasititsownsetoflogictopredictthemarketmovewithhigherprobability.PutCallRatiocommonlycalledPCRisasimpleratio.Itiscalculatedontradedvolumesaswellasonoutstandingopeninterestbasis.MostoftheexpertsusesPutCallRatiobasedonOpenInterest(PCROI)asinDerivativesOIhasmoreweightagethantradedvolumesbecauseofitsleveragenature.PCROIiscalculatedbydividingtotalnumberofputsopeninterestbythetotalnumberofcallsOpenInterestonaparticularday. PCROI=TotalnumberofPutsOI/TotalnumberofCallsOIPutCallRatiomoveshigherwhentotalOIofPutsarehigherthantotalOIofCallswhileitsgoesdownwhentotalOIofPutsarelowerthanthetotalOIofCalls.ThePCRcannotbelookedatinisolationasoneshouldtypicallylookatthePCRinconjunctionwithitsrangeorincomparisontothebeginningofnewseries.RisingPCRmeansthatthenumberofputstradedaremorethanthecallstraded,whichindicatesthatthemarketsseemBullishandafallingPCRindicatesjusttheoppositeandtheBearishview.HowtounderstandPutCallRatioandwhyrisingPCRisbullishsign?Let’sassumethatTotalPutOI=1,50,000andTotalCallOI=1,00,000PutCallRatiowillbe1.50anditwillhaveapositiveoutlookManyDerivativesnewcomersurprisesthatwhymorePutshavepositivesentimentIfPutCallRatiomoveshigherthenitwillhaveabullishviewformarketasweunderstandthatmostofthetimeoptionwritersmakesmoneyinthemarketandmorePutsthantheCallmeansmorePutwritersthantheCallwriters.SecondlogicforPutCallRatioisthatmorePutsmeanmoreLongHedgewh