A Put call ratio is an indicator used to gauge the sentiment in the stock market. Our “Nifty Put Call Ratio Analysis” tool is designed to be a predictive tool to help traders in India. By tracking the put call ratio over a period of time, one can get a sense of which direction the market is going to move. It is generally used by contrarians to bet against the crowds. This can be confusing to most new trader so I will make it really simple to understand.
Meaning of Put Call Ratio: It is a ratio that helps traders understand the prevailing demand supply of the underlying stock or index. It is calculated by dividing the number of traded put options by the total number of traded call options.
Some Pointers:
• If the ratio is low, it means that there is a build-up of long positions.
• If the ratio is high, it means that there is a build-up of short positions.
• When the ratio is extreme, usually traders will play for a short-term reversal.
• When the ratio is balanced, it does not give off any significant meaning in isolation.
• There is no objective answer or golden number to follow. It entirely depends on the average historical put call ratio of the stock.
• Consider factors such as expiry, news events and other macro market events which can have a short-term impact on the average put call ratio.
Learn how to use our tool in a step by step format:
To access the tool, click on “FnO Analysis” in the main menu and select “Nifty Put Call Analysis” as shown in the image above.
Features: You can get the put call ratio of Nifty for near month, next month and far month contracts. It is categorized this way because there are many options strike prices which can possible cause a confusion or inconvenience during analysis. The important point to note is that this tool is only dedicated to the Nifty Index. The data updates every 15 seconds as shown above and the put call ratio is shown in the bottom right hand side corner. This ratio also changes every 15 seconds.
Columns: Note what each column represents in case you don’t already know this. It will save your time if you’re new to this.
• Strike Price – Nifty strike price intervals are listed in the ascending order.
• Expiry Date – It is the expiry date of the contracts.
• Put (OI) – Put option open interest shows you the total outstanding open positions in put options of the contract.
• Call (OI) - Call option open interest shows you the total outstanding open positions in call options of the contract.
• Put Volume – Shows you the total volumes traded of put options in Lakhs.
• Call Volume – Shows you the total volumes traded of put options in Lakhs.
• Put Contracts – Total number of contracts traded in put options.
• Call Contracts – Total number of contracts traded in call options.
If you need any clarifications, please write it in the comments section below.