What is Put/Call Ratio?
Definition of Put/Call Ratio: It is a pointer used in the technical analysis used for assessing the sentiments of the market about directions in future of a certain security or money for the whole market in a general way. It is estimated by dividing the varieties of “put choices” by the different “call choices” for a specific asset or the whole market. As most of the investors purchase put options while thinking about the market will experience losses or purchase call options when the expectations arises, the ratio can offer analysts to lead the whole optimism or pessimism in market. Generally, if the put option dominates, it is the bearish sign and if the call option is larger, the indication is regarded bullish. On the other hand, this marker does not offer a real reading, mainly if the holder of options rolls over the positions to the coming month. The extra timing and volume of this kind of adjustment of portfolio on the basis of material can deform the ratio’s validity. Contrarian shareholders generally think that the several other investors are in combination with where the market cost behavior is really headed. The Contrarian assume that by that time the shareholders are focused on the purchasing puts, the damage that the costs has gone through and that the rally is in the process of making.