PCR, or Put Call Ratio, is a derivative indicator in the stock market used to gauge market sentiment. It helps traders assess whether the market is bullish or bearish based on open interest in put and call options.
a) PCR (Put Call Ratio): A ratio calculated by dividing the open interest in put options by the open interest in call options on the same day.
Why Use It?
-> PCR helps traders understand market sentiment, indicating whether investors are more bullish (lower PCR) or bearish (higher PCR).
-> PCR > 1 implies bullishness, PCR < 1 implies bearishness and if PCR = 1 implies a sideways market.
-> If PCR is very far from 1 on either side it implies the market is oversold/overbought and that a reversal could happen.
-> Stock market indices provide a snapshot of overall market performance and help investors track market trends.
Analysis-> Instrument Overview-> Open Interest-> PCR vs. Index
How to Use It:
-> Select an expiry date.
-> Choose a specific call and put strike prices or analyze all strikes.
-> View an interactive graph showing the PCR value compared to the stock market index.
-> Access charts displaying total call and put OI for further analysis.
1) What does a high PCR value indicate?
-> A high PCR value typically suggests bullish sentiment in the market, as there is a higher open interest in put options compared to call options.
2) How can PCR be used in trading decisions?
-> Traders often use PCR to gauge market sentiment and potential reversals. Extreme PCR values may signal overbought or oversold conditions.
a) Put-Call Ratio (PCR): A Beginner’s Guide-> Link
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