Put-⁠Call Ratio

What is the put-call ratio?

The put-call ratio is put contracts divided by call contracts for a defined market, security, and period, using the same measure, such as volume or open interest, in both parts. A reading of 0.60 means three puts for every five calls. A reading of 1.20 means six puts for every five calls.

The universe can be one ticker, equity options or index options, and the measure and period must match throughout the calculation. Volume measures contracts traded; open interest measures contracts outstanding after each clearing cycle.

How to read the contracts behind the put-call ratio

Options flow shows the strikes, expirations, premiums and execution prices driving the activity. Group related legs before evaluating the complete position.

A protective put purchase and a short-put sale both contribute put volume but create opposite option delta. A long call and a covered-call sale both contribute call volume. Read the package’s buy and sell sides to connect the contract counts to its exposure.

Volume includes repeated trading in the same series. Open interest measures the contracts remaining after position changes are processed. Read their changes together to distinguish active turnover from concentrated outstanding positions.

How to compare put-call ratios like for like

Study single-stock, index and volatility-product ratios separately. Compare the same measure across the same universe and time window. Keep put and call counts alongside the ratio so the activity level remains visible.

When call volume is zero, the ratio is undefined, so read the raw put and call counts instead. A rolling-sum ratio divides total puts over the chosen window by total calls over that same window.

Limitations of the put-call ratio

• Read the side of each trade for direction. The ratio counts contracts: a protective put purchase and a short-put sale add the same put volume with opposite delta, and a covered-call sale adds call volume just as a long call does.
• Check the premium behind the count. Every contract counts the same, so a cheap far out-of-the-money option weighs as much as an expensive in-the-money one.
• Compare readings within the same universe and measure. Equity, index and volatility-product ratios behave differently, and a volume ratio tracks the session’s trading while an open-interest ratio tracks outstanding positions.
• Read the raw counts in thinly traded names. A few trades swing the ratio widely there, and it is undefined when call volume is zero.
• Check for early-exercise volume before reading one day’s ratio. Trades tied to early exercise skew equity put-call ratios in the sessions where they cluster, as Cboe’s research on early-exercise order flow shows.

Bottom line

Against this universe’s 60-day median of 0.72, the 0.60 session reads call-heavy, so judge every reading against its own history. Treat an extreme as a prompt to inspect the strikes, expirations and trade structures behind it, and take your direction from those.