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The OEX Put-Call ratio or PCR is based on the S&P 100 Index, it is a measure of the number of puts versus the number of calls traded on the S&P 100 (Total put volume divided by total call volume). It is considered as a more reliable indicator than the other PUT-CALL ratios.
Put/Call ratios are measures of market sentiment and are used by many traders to gauge the market. They generally look for extreme moves in this indicator. When the put-call ratio moves to an extreme high value, for example above 1.5, traders sentiment is bearish (The number of put contracts traded is higher the number of traded call contracts) , and when the put-call ratio moves to an extreme low value, traders sentiment is bullish (call volume traded is higher the put volume).
However, because the PCR indicators are generally used as contrarian indicators, a high put-call value (which indicates a bearish sentiment) is a sign that a correction is ahead. Options traders lose money most of the times, this is why the general sentiment about the market direction is usually wrong and this is why the PCR indicators are used as contrarian indicators.
This OEX Put-Call data is retrieved from the options clearing corporation website and it spans from 2007 to present. The OCC keeps the data for only two years.
A symbol whose name is ^OEX_PR is created and it will contain the Put-Call ratio data.
Trading financial instruments, including foreign exchange on margin, carries a high level of risk and is not suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to invest in financial instruments or foreign exchange you should carefully consider your investment objectives, level of experience, and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with trading and seek advice from an independent financial advisor if you have any doubts.
