The put-call ratio (PCR) is a popular indicator in options trading that measures market sentiment by comparing the trading volume of put options (which profit from a stock’s decline) to call options (which profit from a stock’s rise).

It’s calculated as: PCR = Put Volume / Call Volume

A PCR below 1 suggests bullish sentiment, as more traders are betting on upside via calls.

A PCR above 1 indicates bearish sentiment, with more focus on downside protection or speculation via puts.

Around 0.7 or lower is often seen as strongly bullish, while 1.0 or higher leans bearish, though interpretations can vary by context like overall market conditions or the stock’s volatility.

Traders sometimes treat the P/C Ration as a contrarian indicator:

• Extremely high ratios (e.g., above 1.5) can mean pessimism is overstretched and may precede a bullish reversal.
  
• Very low ratios (e.g., below 0.2) can indicate excessive optimism and a potential bearish reversal.

In summary, the put‑to‑call ratio is a straightforward way to see whether option traders are buying more downside protection or upside exposure. Values above or below typical ranges signal shifts in sentiment, but the metric is best used with other tools rather than in isolation.