Put-Call Ratio

The Put-Call Ratio is a Technical Indicator that measures the bullishness or bearishness of the market.

The two main components of the Put-Call Ratio are the trading volumes of the Put Options contracts and the trading volume of the Call Options contracts.  If the number of outstanding traded Call Options exceeded the outstanding number of Put Options the Put-Call Ratio is said to indicate a bullish trend.  The Put-Call Ratio is said to indicate a bearish trend when the opposite is true.  The Put-Call Ratio is often measured to determine the market sentiment of an individual equity, or an index such as the DAX, CAC40, or S&P500.  Traders take a special interest when the Put-Call Ratio changes direction suddenly.  Any sudden change would then be used by traders to get ahead of a coming trend in market sentiment.