Put-Call Ratio
The put-call ratio is a technical indicator used to measure the sentiment of the stock market. It is calculated by dividing the number of put options traded by the number of call options traded. Put options give the holder the right to sell a security at a certain price, while call options give the holder the right to buy a security at a certain price. The put-call ratio is used to gauge investor sentiment and can be used to predict market movements.
History of the Put-Call Ratio
The put-call ratio was first developed in the late 1960s by financial analyst and trader Richard Arms. He used the ratio to measure the sentiment of the stock market and to predict market movements. The ratio has since become a widely used technical indicator and is used by traders and investors to gauge investor sentiment and to make trading decisions.
Put-Call Ratio Table
| Ratio | Meaning |
|---|---|
| Less than 1 | Bearish sentiment |
| 1 | Neutral sentiment |
| Greater than 1 | Bullish sentiment |
Summary
The put-call ratio is a technical indicator used to measure the sentiment of the stock market. It is calculated by dividing the number of put options traded by the number of call options traded. The ratio is used to gauge investor sentiment and can be used to predict market movements. For more information about the put-call ratio, visit Investopedia, The Balance, and Investing.com.
See Also
- Options Trading
- Implied Volatility
- Delta
- Gamma
- Theta
- Vega
- Time Decay
- Option Chain
- Option Price
- Option Greeks
