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CBOE Put Call Ratio

CBOE Put Call Ratio

Here we see the put call ratio from the CBOE.

The put-call ratio is calculated by dividing the number of traded put options by the number of traded call options.

A put-call ratio of 1 indicates that the number of buyers of calls is the same as the number of buyers for puts. However, a ratio of 1 is not an accurate starting point to measure sentiment in the market because there are normally more investors buying calls than buying puts. So, an average put-call ratio of 0.7 for equities is considered a good basis for evaluating sentiment.A rising put-call ratio, or a ratio greater than 0.7 or exceeding 1, means that equity traders are buying more puts than calls. It suggests that bearish sentiment is building in the market. Investors are either speculating that the market will move lower or are hedging their portfolios in case there is a sell-off.A falling put-call ratio, or below 0.7 and approaching 0.5, is considered a bullish indicator. It means more calls are being bought versus puts.