How to Read the Put to Call Ratio
The CBOE Options Put/Call Ratio is a contrarian indicator commonly used
by investors to gauge overall sentiment. The close today indirectly
suggests a rally could be looming around the corner.
The lower the reading then the more call volume is being traded versus put volume, suggesting investors are bullish
on the market. On the contrary a high reading above 1.0 means there is
more put volume versus call volume, suggesting investors are bearish overall.
As can be seen the ratio has a recent trading range of about .75 – 1.15
On Wed., the ratio spiked to over 1.55. This is a major contrarian signal to be biased on the long side in the near term.
