As the name suggests, it is the ratio of all the Puts/Calls traded every day. If the ratio is more than 1, it means that more puts have traded during the day and if it is less than 1 it means more calls traded during the day.
To trade based on PCR; you will first need to collect historic PCR to know the extreme ends it can reach. NSE shares this information on this link daily. Assume that this average range for PCR over the last 1 year is in between 0.7 and 1.3.
PCR is also a contrarian strategy which believes that option buyers will typically lose money. So a typical way to analyse PCR would be:
a. If PCR is below 1, it would mean that more calls are being traded and since more calls are being traded by the retail traders (option buyers) this could mean that the markets might do the opposite which is go down. Lower than 1 the PCR is, higher the chances of the market coming down. Since you know that historically PCR has been in the range of 0.7 to 1.3, at 0.7 PCR the chances of the market coming down will be the highest.
b. If PCR is above 1, it would mean that more puts are being traded and since more puts are being traded by the retail traders (option buyers) this could mean that markets might do the opposite which is go up. Higher than 1 the PCR is, higher the chances of the market going up. Since historically PCR is in the range of 0.7 to 1.3, at 1.3 PCR the chances of market going up will be the highest./
contrary to ur statement when pcr is .7 market wll reverse ie it will go up and pcr more than 1.4 it is ripe for correcetion
Sir
Today all dayPCR was bellow 1 also pe primium increased but market very bullish any specific reason?
Sir
Fantastic explanation on PCR…. can you also explain about India Vix also. How to read in to India Vix?
Thanks Ameet Will write article on India VIX
Rgds,
Bramesh
d/sir
pl tell me about delta
how to use delta for treading?
how it is calculated?
Hi Brahmesh,
Can u tell me how a stop loss works. I am too afraid of putting a stop loss thinking what if the shadow of any next candle with touch my stoploss and after taking all my capital again it will move to regular pertaining trend… please help me.
This is my lesson of trading learning career…. please help me. I never had any guru because of lack of money but i have a winning strategy back tested several time by me but the stop loss fear is too strong in my mind and thus sometimes i loose larger than my previous profits
Hello Zafer,
You do not have trust on your trading system thats why you are afraid of SL. Your statement ” i have a winning strategy” but am afraid of SL are contradictory.
Rgds,
Bramesh
PCR to be checked on VOL or OI?
Both
Rgds,
Bramesh