Calculation and mechanics
The metric is a quotient: put contracts divided by call contracts. Depending on the data basis there are two variants. The put/call ratio by volume uses the option volume of one day and can swing accordingly. The put/call ratio by open interest uses the open interest and moves more slowly because it reflects the stock rather than the daily turnover.
The CBOE publishes put/call ratios for the total market and separately for index and equity options. Index options are often used to hedge whole portfolios, which is why their ratio can differ structurally from that of pure equity options.
P/C = put contracts / call contracts
Distinction
The two variants answer different questions. By volume: were more put or call contracts traded today? By open interest: are more put or call contracts open? In thinly traded option chains the volume ratio can swing strongly on individual days, while the OI ratio is usually more stable.
The ratio says nothing about whether the puts or calls were bought or sold. Every contract has a buyer and a seller.
Sources
Related terms
- Open Interest (OI, open contracts)
- Option Volume (Opt Vol, average daily option volume)
- VIX (CBOE Volatility Index)
- SKEW Index (CBOE SKEW, tail risk index)
All market and analytical information is provided for educational and analytical purposes only and does not constitute investment advice or a trading recommendation.