The Put-Call Ratio (PCR) is a popular technical derivative indicator used by market participants to assess broader market sentiment across index options (such as Nifty 50 and Bank Nifty) and stock options.
Mathematical Formula for PCR
PCR is calculated by dividing total Put contract volume or open interest by total Call contract volume or open interest.
PCR (OI) = Total Put Open Interest / Total Call Open Interest
Interpreting PCR Threshold Values
- PCR > 1.2 (Bullish / Contrarian Support): When PCR rises significantly above 1.2, it indicates that option writers are selling a high volume of Puts, reflecting strong downside support.
- PCR < 0.8 (Bearish / Contrarian Resistance): When PCR falls below 0.8, Call writing dominates, indicating significant overhead resistance.
- PCR 0.8 - 1.2 (Neutral Range): Reflects balanced positioning between Call and Put writers.
Limitations of PCR
While PCR provides helpful sentiment context, it should never be treated as an absolute market prediction. Big institutional orders or hedging activity can shift PCR values temporarily without altering the long-term price trend.
Try our calculator: Interactive PCR Calculator Tool →