The put/call ratio is one of the most widely used sentiment indicators in options trading. It provides a quick snapshot of market sentiment by comparing the trading volume of put options to call options.

What Does the Put/Call Ratio Measure?

The put/call ratio is calculated by dividing the number of traded put options by the number of traded call options:

Put/Call Ratio = Put Volume / Call Volume

Put options give the holder the right to sell an asset at a specified price
Call options give the holder the right to buy an asset at a specified price

When more puts are traded than calls, the ratio rises above 1.0, indicating bearish sentiment. When more calls are traded, the ratio falls below 1.0, indicating bullish sentiment.

How to Interpret the Put/Call Ratio

Ratio	Market Sentiment	Interpretation
Above 1.0	Bearish	More traders buying downside protection
0.7 - 1.0	Neutral	Balanced market sentiment
Below 0.7	Bullish	More traders betting on upside

Contrarian Indicator

Many traders use the put/call ratio as a contrarian indicator. Extreme readings often signal potential reversals:

Very high ratio (above 1.2): Excessive fear may indicate a market bottom
Very low ratio (below 0.5): Excessive greed may indicate a market top

Types of Put/Call Ratios

Equity Put/Call Ratio: Based on individual stock options
Index Put/Call Ratio: Based on index options (S&P 500, etc.)
Total Put/Call Ratio: Combines both equity and index options

The equity put/call ratio tends to be more volatile and useful for short-term signals, while the index ratio reflects institutional hedging activity.

Using Put/Call Data in Your Analysis

Historical put/call ratio data can be valuable for:

Identifying sentiment extremes
Confirming trend reversals
Building quantitative trading signals
Backtesting sentiment-based strategies

You can access historical put/call ratio data for thousands of tickers through the FinBrain Put/Call Data API.

Example: Fetching Put/Call Data

from finbrain import FinBrainClient

fb = FinBrainClient(api_key="YOUR_API_KEY")

# Get put/call ratio data for AAPL as DataFrame
df = fb.options.put_call("S&P 500", "AAPL", as_dataframe=True)

print(df.head())
#             ratio  callCount   putCount
# date
# 2024-03-19   0.40     788319     315327
# 2024-03-18   0.52     650420     338218

# Or without DataFrame
data = fb.options.put_call("S&P 500", "AAPL")
for record in data["putCallData"]:
    print(f"{record['date']}: Ratio = {record['ratio']}")

Key Takeaways

The put/call ratio measures market sentiment through options activity
Values above 1.0 indicate bearish sentiment; below 0.7 indicate bullish sentiment
Extreme readings can be used as contrarian signals
Historical data enables backtesting and quantitative analysis

Want to incorporate put/call ratio data into your trading strategy? Get started with the FinBrain API.

What is the Put/Call Ratio? A Complete Guide