put/call ratio- another technical indicator is the put/call ratio. the put/call

ID: 2775304 • Letter: P

Question

put/call ratio- another technical indicator is the put/call ratio. the put/call ratio is the number of put options traded devided by the number of call options traded the put/call ratio can be constructed on the market or an individual stock. below you will find the number of puts and calls traded over a four week period fo all stocks.

how would you interpret the put/call ratio? calculate the put/call ratio for each week from the analysis, does it appear the market is expected to be upward trenfing or downward trending?

week puts calls 1 1,874,986 1,631,846 2 1,991,650 1,772,815 3 2,187,450 1,976,277 4 2,392,751 2,182,270

Explanation / Answer

Put call ratio = no. of puts/ no. of calls

week

puts

calls

Put/Call ratio

1,874,986

1,631,846

1874986/1631846=

1.148997

1,991,650

1,772,815

1991650/1772815=

1.123439

2,187,450

1,976,277

2187450/1976277=

1.106854

2,392,751

2,182,270

2392751/2182270=

1.09645

This ratio is used to compute direction of the market. If Put/call ratio is greater than 1, it is expected the market will be bearish and vice versa. In each week, Put/ call ratio is great that 1, that shows market is expected to be downward trending.