A Put-Call Ratio or PCR is basically a ratio of put options to call options that have been placed on future options based on the Stock Market. When talking about options, people think it’s like a derivative of a stock and is linked to its value. That’s actually not the case, a stock option lets you have the choice to purchase or sell a stock at a given price called strike price on a specific date. This option is sold at a premium, which you have to pay upfront, if exercised you’re supposed to produce 100 shares per lot.
A Call option basically means that you purchase a lot of shares and expect to sell them at a later date. A Put option means that you’re actually selling a whole lot at the current price and expect to purchase the lot at a later date. A Call option is placed when you expect the Stock Market or the specific share to increase. The inverse is true in the case of a Put option, you expect the market to tank or follow a bearish trend.
A Put Call Ratio is the number of put options compared to call options that have places by various investors. It’s used to gauge the sentiment of the market. A PCR of 1 or close to 1 means that the market is stable. A PCR of less than 1 means that the market is expected to boom or increase. There’s a bullish sentiment that’s lingering in the underlying Stock Market. A Put Call Ratio of more than 1 indicates that there’s a bearish trend in the market and it’s either expected to tank or crash.
PCR can be used in making decisions like buying and selling a certain share. It can be helpful to ensure you book your profits at the right time, for example, a drastic change in the Put-call ratio would mean a change in the market sentiment. The only issue you could have is to know where to find the PCR ratio so it helps you out. IIFL Securities is among the leading stockbrokers in India who can help you out in this situation. They have a specialized section for Put Call Ratio. They provide information about the PCR as what PCR is, how you could analyze it, and also some basic FAQs for you to refer to. It’s very useful as it gives you a proper report of all the quantity of Put and Call options placed.
To use PCR to the fullest, you need a Trading and Demat account. IIFL Securities provides a complete 2-1 service. IIFL Securities is a full-service broker who provide personalized services to their customers. They provide complete information about the Stock Market, including company reports. They have an award-winning research team that ensures to provide factual information, helping you make the most of your investments. IIFL trading accounts let you invest in shares, commodities and also lets you trade in futures or options. You can utilize their PCR Services to ensure you have profits on the shares you purchase, sell, or the trades you exercise.