Put-call ratio (PCR) explained: OI PCR vs volume PCR

The put-call ratio, usually written PCR, is one of the most quoted numbers in Indian options commentary. It compares the activity in puts with the activity in calls.

Two versions

• OI PCR: total put open interest divided by total call open interest.
• Volume PCR: total put volume divided by total call volume for the day.

A PCR of 1.00 means puts and calls are equal. Above 1.00 means more puts than calls. Below 1.00 means more calls than puts.

How to calculate it

Add up the put OI across all strikes of one expiry, add up the call OI across the same strikes, and divide. If put OI is 1.2 crore contracts and call OI is 1.0 crore, the OI PCR is 1.2.

Why the two versions differ

Open interest is the number of positions still open at the end of the session. Volume is how many contracts changed hands during the session, including trades that were opened and closed the same day. So OI PCR reflects positioning that is still there, while volume PCR reflects the day's trading activity.

How people read it

There are two common readings, and they point in opposite directions:

• Sentiment reading: a high PCR means many puts are being bought, which suggests traders are worried.
• Contrarian reading: a very high PCR means pessimism may be stretched, and a very low PCR means optimism may be stretched.

There is no number that is "bullish" or "bearish" on its own. Different index options, different expiries and different market phases have different normal ranges. Any rule such as "above 1.3 means buy" is a guess, not a fact.

Pitfalls

• Put open interest is often large because of hedging by investors who own shares, not because they are bearish on the market.
• Each contract has a writer. A put with high OI may have been written by someone who is bullish.
• PCR depends on which expiry and which strikes you include. Always check the expiry.
• It is a snapshot at the close, not a live reading.

How to use it sensibly

A reasonable use is to compare today's PCR with the last few sessions to see which direction it is moving, and to read it next to max pain, the highest OI strikes and the FII positions. Treat it as context, not as a signal.

Tradingraph shows both the OI PCR and the volume PCR for each index from NSE's end-of-day file.

This page is for information and education only and is not trading advice.