The put-call ratio compresses a whole option chain into one number. Divide total put open interest by total call open interest and you have PCR by open interest. Divide put volume by call volume and you have PCR by volume. Both are published or trivially derived from NSE’s option chain for NIFTY, BANKNIFTY and every stock with listed options.
The two versions answer different questions and are routinely quoted as if they were the same thing.
| Variant | Numerator and denominator | What it describes |
|---|---|---|
| PCR by open interest | Outstanding put contracts over outstanding call contracts | The standing book at the end of the session |
| PCR by volume | Puts traded over calls traded | Today’s activity, including trades that closed positions |
| Strike-level PCR | Put open interest over call open interest at one strike | Where the book is concentrated |
| Stock-level PCR | The same ratio on a single underlying | Positioning in one name rather than the index |
How it is read, and what that reading assumes
The common convention treats a high PCR as heavy put positioning and therefore bearish sentiment, and then inverts it: crowded bearish positioning is read as a contrarian bullish signal. A low PCR is read the other way round.
That chain has two assumptions in it. The first is that put open interest represents bearish intent. It does not necessarily. A put sold by an institution to collect premium adds to put open interest while expressing the opposite view, and a put bought as a hedge against a long cash position is not a directional bet at all. The second assumption is that positioning predicts direction. We are describing what practitioners believe here, not an established result.
Caveats
Levels are not comparable across underlyings. The mix of hedging, premium selling and directional speculation differs between an index chain and a single-stock chain, so a PCR of 1.2 does not carry the same meaning in both.
Levels are not comparable across time either. Contract specifications, expiry structure and the participant mix in Indian options have all changed materially, which breaks any long threshold you might carry forward from an older backtest.
Index PCR is dominated by hedging flow. A large share of index put open interest exists to protect cash and futures books, which is why the index ratio can sit persistently on one side without saying anything about direction.
The cohort matters. SEBI’s study of individual F&O traders found 93 percent made net losses over FY22 to FY24, with an aggregate net loss of ₹1.81 lakh crore across 1.13 crore traders (Business Standard). A ratio built from that activity is a summary of a losing cohort’s positioning, which is a reason to test any rule built on it properly rather than to assume it inverts cleanly.