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Put-call ratio (PCR) volume levels represent the relationship between bearish put contracts and bullish call contracts traded during a session. Analyzing these levels reveals market sentiment, areas of potential support/resistance, and whether traders are overly fearful or greedy.How to Interpret PCR LevelsThe ratio is calculated as:\(\text{Put-Call Ratio (PCR)} = \frac{\text{Total Put Volume}}{\text{Total Call Volume}}\)1. Ratio Above 1.0 (Bearish/Protective Sentiment)What it means: More puts are being traded than calls.Sentiment: Traders are leaning bearish, or are heavily hedging their existing portfolios against a potential market drop.Extreme levels (e.g., > 1.2 or > 1.4 for major indices): Can serve as a contrarian indicator. Extreme fear can signal an oversold market that might be primed for a relief rally.2. Ratio Below 0.7 (Bullish/Euphorla Sentiment)What it means: Traders are buying significantly more calls than puts.Sentiment: Greed or strong optimism prevails.Extreme levels (e.g., < 0.5): Can serve as a contrarian warning sign. Extreme euphoria often points to an overbought market where a pullback or reversal is likely.3. Ratio Around 0.7 - 1.0 (Neutral Baseline)What it means: The market is generally balanced between calls and puts. This is widely viewed by institutional traders as the baseline "normal" trading range for indices like NIFTY or the S&P 500
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Open-source script
In true TradingView spirit, the creator of this script has made it open-source, so that traders can review and verify its functionality. Kudos to the author! While you can use it for free, remember that republishing the code is subject to our House Rules.
Disclaimer
The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.