Why is "Put Call Ratio" important in the stock market?

 Friend,

Let us understand this in very simple words. The market shows movement in the short term by keeping in mind the technical aspects.

Technical aspects tell us that if there are more buyers in the market then the price will increase and if there are more sellers then the price will fall.

The open interest data available in the option chain also shows us the total available position in the market. Yes, according to the words, some things are a bit confusing.

Two words are very popular in the option market.

1)Call

2)Put

If we are an option buyer then call indicates a rising market, while put indicates a falling market.

But if we are a seller then selling a call means I am seeing a fall in the market and selling a put means I am seeing a rise in the market.

And all the open interest data available on the option chain belongs to the option seller.

Now when we calculate the put call ratio according to the total data of put and call, it becomes clear to some extent which side has more strength at present. That is why an option trader uses this data.

Hope the post will be useful for you.

Thank you