Put call ratio can be used as additional confirmation for taking a trade, moreover, you can get PCR live for nifty and banknifty. Before explaining you put call ratio analysis, I will tell you the most important fact about options trading it is:
“About 70% option contracts expire worthless.”
This means the most profitable group of options trader is “Option Writers”.
Now you will get the put-call ratio from our real-time live put-call ratio tool, which you can find here: Nifty Put Call Ratio [Live]
How is it used in Technical Analysis:
Suppose today’s put call ratio is 1.5. Now, this number is clearly above 1 so put option writing (shorting) is more than call option. In simple words, smart people are expecting nifty future will move higher or remain sideways in coming sessions. But they are not expecting nifty to go down. Now suppose if Put call ratio is 0.8, here it is below 1 so call writing is more than put writing. This is because large traders are betting that nifty future may correct or remain sideways in the near term.
How to calculate Put-Call Ratio:
- Open Nifty options chain page using this link: Option Chain
- Scroll towards the bottom of the page, you will find total Open interest of both call options as well as put options.
- Just open the calculator, and divide put OI by call OI.
- Example: If the total OI at put is 100,000 and the total of call is 65,000. Then we will divide 100000/65000 = 1.53. So Put-Call Ratio is 1.53
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Dear Bhavish,
I have a doubt about Put call ratio.
It P/C > 1, i.e., More puts are being bought compared to Calls, hence its an indicator of bearish market.
& P/C < 1., i.e., More calls are being bought compared to puts, hence its an indicator of bullish market.
Why do we infer it in contrary to this?
How do we find that the options are being shorted/written instead of being bought by investors, with which indicator it is related?
Please reply
This is because if PCR > 1 more puts are being bought (by retail traders which generally loose, since 90% odd option contracts expire) and same number of puts are being sold (by institutional traders, and they make money). So, with PCR understanding comes the contrarian view or opposite views
contrarian view – means anything can happen at anytime. randomness is the eternal law of nature. leave analysis, take a beer, shoo nifty fear.
Put/call ratio is contrarian indicator, which means that if the ratio is above the 1 it means that the nifty is more likely to behave negative, else below 1 on put/call ratio is considered positive.