Put Call Ratio Definition | Firstock

If you’ve ever looked at the stock market and wondered, “How do traders guess what the market might do next?”—you’re not alone. The market often feels like a noisy crowd where everyone is shouting a different opinion. One simple tool that helps make sense of this noise is the put call ratio.

Whether you’re new to investing, exploring a stock trading app, or just curious about how options traders think, understanding the put call ratio definition can give you a fresh perspective. Think of it as a mood meter for the market—showing whether traders are feeling fearful or confident.

In this guide, we’ll break down the put call ratio in plain English, with real-world examples, simple explanations, and practical use cases—especially useful if you’re using a trading app in India with a SEBI registered broker like Firstock.

Learn put call ratio, put call ratio definition, put call ratio formula & option put call ratio. Ideal for trading apps for beginners using a stock trading app in India with a SEBI registered broker.

What Is Put Call Ratio?

The put call ratio is a popular indicator used in options trading to understand market sentiment. It compares the number of put options traded to call options traded.

In simple terms, it answers one key question:
Are more traders betting on the market falling or rising?

When you see this ratio, you’re basically peeking into the collective mindset of traders.

Put Call Ratio Definition in Simple Words

The put call ratio definition is straightforward:

Put Call Ratio = Number of Put Options ÷ Number of Call Options

• Put options show bearish (negative) expectations
  
• Call options show bullish (positive) expectations
  

So, the put call ratio tells us whether fear or optimism is dominating the market.

Why Put Call Ratio Matters to Traders

Why do traders care so much about this ratio?

Because markets often move opposite to what the majority expects. When too many people are fearful, the market may be close to a bottom. When everyone is overly confident, a correction might be near.

That’s why the option put call ratio is often called a contrarian indicator.

Understanding Put Options and Call Options

Before going deeper, let’s quickly simplify options:

• Call Option → You expect prices to go up
  
• Put Option → You expect prices to go down
  

Imagine a cricket match:

• Buying calls is like cheering for your team to win.
  
• Buying puts is like preparing for a loss.
  

The put call ratio simply counts how many people are cheering versus worrying.

Put Call Ratio Formula Explained

The put call ratio formula is:

Put Call Ratio = Total Put Volume ÷ Total Call Volume

Example

• Put options traded: 80,000
  
• Call options traded: 100,000
  

Put Call Ratio = 0.8

This means optimism is slightly higher than fear.

Option Put Call Ratio vs Stock Market Sentiment

The option put call ratio reflects trader psychology:

• Low ratio → Market confidence is high
  
• High ratio → Market fear is high
  

It doesn’t predict prices directly but gives valuable context—especially when used through a reliable trading app.

How to Read Put Call Ratio Values

Here’s a simple way to interpret it:

• Below 0.7 → Market may be overconfident
  
• 0.7 to 1.0 → Balanced sentiment
  
• Above 1.0 → Fear dominates
  

Extreme values often hint at possible reversals.

Put Call Ratio for Beginners: A Simple Example

Think of the market like a crowded elevator:

• If everyone rushes to one side, the balance feels off.
  
• Similarly, when too many traders choose puts or calls, the market can swing the other way.
  

That’s how the put call ratio helps beginners spot emotional extremes.

Using Put Call Ratio in a Stock Trading App

Most modern stock trading apps display the put call ratio clearly. For trading apps for beginners, this is extremely helpful.

A good trading app in India allows you to:

• Track PCR in real time
  
• Compare index-wise data
  
• Use it alongside charts
  

Platforms like Firstock, backed by a SEBI registered broker, make this data easy to understand.

Put Call Ratio in Indian Markets

In India, traders often track PCR for:

• NIFTY
  
• BANK NIFTY
  
• Popular stocks
  

Indian markets react strongly to sentiment, making the put call ratio especially relevant for intraday and short-term traders.

Put Call Ratio and Market Reversals

One of the biggest strengths of PCR is spotting potential reversals.

• Extremely high PCR → Panic selling may be ending
  
• Extremely low PCR → Overconfidence may lead to correction
  

But remember, it’s a signal, not a guarantee.

Common Mistakes While Using Put Call Ratio

Many beginners make these mistakes:

• Using PCR alone
  
• Ignoring market trends
  
• Panicking over small changes
  

The put call ratio definition is simple, but interpretation needs patience.

Combining Put Call Ratio with Other Indicators

For better accuracy, combine PCR with:

• Support and resistance
  
• Volume analysis
  
• Trend indicators
  

Most advanced trading apps allow this combination easily.

Is Put Call Ratio Useful for Long-Term Investors?

While PCR is more popular among traders, long-term investors can still benefit by:

• Avoiding emotional entries
  
• Understanding market mood
  

Even if you’re investing via a stock trading app, sentiment awareness helps.

Why Firstock Users Should Track Put Call Ratio

If you’re using Firstock:

• You get clean data
  
• Easy-to-read PCR indicators
  
• Support from a SEBI registered broker
  

This makes learning and applying PCR smoother—especially for beginners.

Conclusion

The put call ratio is one of the simplest yet most powerful tools in options trading. By understanding the put call ratio definition, learning the put call ratio formula, and observing the option put call ratio, you gain insight into market psychology.

Whether you’re just starting with trading apps for beginners or actively trading using a stock trading app in India, PCR helps you stay grounded when emotions run high. Think of it as your market compass—quietly guiding you when the noise gets loud.

Frequently Asked Questions (FAQs)

1. What is the ideal put call ratio for beginners?

A ratio between 0.7 and 1.0 is considered balanced and beginner-friendly.

2. Is put call ratio reliable for intraday trading?

Yes, when combined with charts and volume, it’s quite useful for intraday decisions.

3. Can I see put call ratio in a trading app?

Most modern stock trading apps in India display PCR data clearly.

4. Does a high put call ratio mean the market will fall?

Not always. Very high values may actually signal a possible market rebound.

5. Is put call ratio relevant only for options traders?

Mostly yes, but even investors benefit from understanding market sentiment.