Can PCR be used to predict market? How to find PCR? Please explain
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Put Call Ratio acts as a contrarian indicator in short run. So, if Put Call Ratio is high, it indicates Bearish signal and vice versa.
In the long run, Put Call Ratio along with Option Chain helps in finding Support and Resistance.
Very high number of Put positions at a particular strike price acts as a Support and Call positions at a particular strike price acts as a Resistance.
Here you can find the PCR https://www.indiainfoline.com/markets/derivatives/put-call-ratio
A call is basically a kind of option in which you have the right to purchase a specific asset at a specific price for a specified period of time.
A put is basically a kind of option in which you have the right to sell a specific asset at at a specific price for a specified period of time.
Put option increases in value when price of the underlying asset decreases and vice versa.
Put Call Ratio is the Put Volume divided by the Call Volume. Therefore, when the PCR is high this indicates the bearish market or an oversold market, which on getting correction will lead to increase in the price of assets and when the PCR is low it indicates the bullish market or an overbought market, which on getting correction will lead to decrease in the price of assets thereby helping us to sell at higher price in first case and purchase at lower price in the second case respectively. Hence, this ratio is also one of the contrarian indicator as it advices to purchase in an oversold market and to sale in an overbought market.
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