The PCR Theory
PCR - The PCR is Put call Ratio i.e The ratio of put trading volume divided by the call trading volume. If the put call ratio is 0.90 it mean that for every 100 call bought, 90 put were bought.
FORMULA
PCR = TOTAL PUTS OI/TOTAL CALLS OI
Lets makes if simple buy the following example
If the total call open interest is 8,067,600 and the put open interest is 5,257,650 show in the pic which is given from the nseindia official website
lets divide the put open interest buy call open interest.
PCR = 5257650/ 8067600
= 0.65
So the 0.65 is your PCR for the NIfty. It means that every 100 call bought where 65 put bought.
** PCR Ratio is used for analyzed the trend of market. How ? lets see
There are two possibility
*If the PCR ( put call ratio) is below the 0.9, i.e that open interest of calls is more then the puts.
Then we can say that market is Bearish.
*If the PCR is above the 1.3 then it assume the market is Bullish, it shows the put bought are more then the call.
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