The Put-Call Ratio: Viewing Market Sentiment Through Options Activity

During periods of fear or euphoria, the CBOE equity put-call ratio can inform your judgment by showing where sentiment may have gone too far.

The stock market responds to a blend of fundamentals, technicals and emotion. But investor psychology—fear, greed, overconfidence and panic—often plays a more powerful role in short-term price movement than earnings or economic data. The Chicago Board Options Exchange’s (CBOE) equity put-call ratio is one of the most direct ways to measure that sentiment in real time.

The put-call ratio is calculated by dividing the daily volume of put options traded by the daily volume of call options traded:

Put-Call Ratio = Total Put Option Volume ÷ Total Call Option Volume