Many traders in the Stock market use the put call ratio as an indicator to determine whether the market is on a bull or a bear run. In a bull run, the market is on rising, while in a bear market, the market is on fall for a certain period, which means that the put & call ratio is used to know and understand the overall mood of the market.
The put option gives the shareholder the right to sell their financial assets stocks in the put call ratio. At the same time, the call option provides the shareholder with the right to buy supplies and other Securities.
As the name suggests, the put/call ratio is a rate for investors and traders to calculate. They simply have to divide the number of puts by the number of calls.
The investor can compute the put call ratio on two different bases.
A. volume: The formula of volume is put volume/call volume
- the open interest: The formula of open interest is total put open interest/ total call open interest
There is also a high and low put-call ratio, which might confuse you, but straightforwardly, a high put-call ratio suggests the current market is on a bearish run, while a low put-call indicates that the current market is on a bullish run.
The trader should always be aware of the current and previous status of the put-call ratio because it is an indicator in the market. It helps track investments’ performance and make decisions regarding the buying or selling shares and other Securities.
As a trader, you should have a basic understanding of the dynamics of the put call ratio. You should also understand how important it is to keep track of it. It is also a common misunderstanding that only the sharpest or the individual with the most information about the Stock market can calculate the put & call ratio. While it’s completely untrue, there are several websites on the Internet that provide you with the facility of calculating the current and real-time put-call ratio. Many fraudulent websites claim to calculate the proper ratio, but you need to be careful about it as an investor or trader.
Investors should always opt for a put & call ratio calculator from a well-known investment platform like IIFL Securities. You just have to visit their website and calculate the put-call ratio easily.
IIFL Securities is one of India’s most famous and fastest-growing stockbrokers who facilitate efficient stock trading and investments through the IIFL Markets app.
This calculator is easy to understand and use. If you want to calculate the put call ratio accurately, you always need to go to a trustworthy firm like IIFL Securities. And yes, beginners can also calculate the put & call ratio to make better investment decisions at the initial stage of their investment journey.