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Put/Call Ratio Indicators

Put/Call ratios are popular indicators that measure mass psychology amongst market participants. The ratio is the trading volume of put options divided by the trading volume of call options. In very simple terms, a put option is market insurance against declining prices, and a call option is market insurance against rising prices. So, when the ratio is relatively high, this means that the majority of investors expect the market to decline (bearish). When the ratio is relatively low, we can conclude that the majority of investors are confident that the market should rise (bullish). Most of the time, the market proves the majority wrong, and therefore, put/call ratios are contrarion indicators.

There are many markets for which put/call ratios may be calculated. We maintain indicators that are based on 3 widely followed versions, which are distributed by the Chicago Board Options Exchange (CBOE). The ratios are:

  • CBOE Equity Put/Call Ratio
  • CBOE Index Put/Call Ratio
  • CBOE Total Put/Call Ratio

We apply moving averages to each of the ratios above to remove the high volatility in the raw data. Currently, we publish 21 put/call ratio indicators.

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