PCR = Total Put OI÷ Total Call OI
Why do we say that PCR pertains to call ‘shorts’ and put ‘shorts’. Why not long?
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In PCR we speak about total OI of Call and Put which includes both short and long. And the strategies is pertaining to the number that we get as an answer.
Wherein, we say that if market is overbought we should go opposite and sell and vice versa for market oversold.
Here we are trying to conclude that strategy is to go opposite to what market sentiment is. We didn’t mention that PCR is related to shorting only.