Glossary

Put/call ratio

The put/call ratio divides the volume or open interest of put options by that of call options.

The put/call ratio is the amount of put options divided by the amount of call options. Providers can use trading volume or open interest. A put gains value when the price falls. A call gains value when the price rises. A value above 1 means that puts outnumber calls.

Traders use the ratio as a rough measure of sentiment. More puts can show that traders seek protection or expect a fall. More calls can show demand for upside exposure. Both sides of every trade exist, so the ratio shows what was traded, not what every participant thinks.

The ratio can mislead. Puts are also used as hedges for spot holdings, and a put can be part of a spread. Volume-based and open-interest-based ratios give different values. A single day of high volume can distort the volume ratio. Check which method the chart uses.