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What is Put Call Ratio & India VIX in share market

What is the meaning of PCR in Nse Share Market ?

Here A1 intraday tips has tried to explain the meaning of a Sentiment Indicator i.e PCR also know as Put Call Ratio. But before we get in to detail of the ratio, Put Call Ratio, we suggest that you should have knowledge of Options - Calls & Puts so that you can learn the PCR very easily.


PUT CALL RATIO

The PCR is a short form of "PUT CALL RATIO". PCR is the very well known Sentimental Indicator for the derivative market in NSE. The put-call ratio (PCR) is a measurement that is widely used by investors to compute the overall mood of a Nse share market i.e Sentiment of the stock market. The PCR can be calculated for indices, individual stocks and for the derivative segment as a whole.

A "put" or put option is a right to sell an asset at a predetermined price. A "call" or call option is a right to buy an asset at a predetermined price.

If traders are buying more puts than calls, it signals a rise in bearish sentiment. If they are buying more calls than puts, it suggests that they see a bull market ahead.



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Calculation of Put Call Ratio & its Analysis

PCR is calculated by dividing the number of open interest in a Put contract by the number of open interest in Call option at the same strike price and expiry date on any given day.

Put/Call Ratio = Put Volume / Call Volume

The Put Call Ratio simply takes the number of put options traded and divides it by the number of call options. The higher the number, the more negative the directional bias is for that asset. E.g. if a PCR shows 2.5, then this means that there has 2.5 times more interest in put options than calls.

The high Put-call ratio (PCR) give the signal that market is in oversold position and is extremely in bearish trend so market can any time turnaround in to bullish trend. high put-call ratio give the strong buying signal in the NSE share market. Same vice versa in low put-call-ratio (PCR).

A Low put-call ratio (PCR ratio) below 1 suggests that traders are buying more Call options than Put options. It signals that most market participants are betting on a likely bullish trend going forward.

A PCR at one (=1) suggests that investors are purchasing the same amount of put options as call options and signals a neutral trend going forward.

No PCR is considered ideal, but a PCR below 0.7 is typically viewed as a strong bullish sentiment while a PCR above 1 is typically viewed as a strong bearish sentiment.
The PCR Indicator is the very useful for Nse Intraday traders while doing day trading, it is a main Technical indicator. The live PCR indicator is most reliable indicator for doing intraday trading in NIFTY INDEX.


What is the meaning of NSE VIX ?

Created by the Chicago Board Options Exchange (CBOE), the Volatility Index, or VIX, is a real-time market index that represents the market's expectation of 30-day forward-looking volatility.

India VIX is a volatility index based on the index option prices of NIFTY & it is used to measure the near term volatility expectations of the markets. India VIX is computed using the best bid and ask quotes of the out-of-the-money near and mid-month.

The NSE VIX also known as a India VIX Index and its help to Investor the measure of market's expectation of volatility in our NSE. The trades can also judge which best buying price of NIFTY option contract and volatility figure (%) is calculated which indicates the expected volatility of NSE share market for the next 30 working days.

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Higher Vix V/s Lower Vix

Generally the High VIX means there is an higher volatility in the NSE share market. Similarly a Low VIX means there is an of lower volatility in the NSE market. Mostly when the VIX rises, the Nifty Index drops and its give the signal to investor that its best opportunity to buy the stock.

India VIX also has a strong negative correlation with Nifty. Every time India VIX falls, Nifty rises and when India VIX rises, Nifty is bound to fall.

Indian volatility index spiked over 31 per cent in on 9th March 2020 on rising concerns over the spreading Coronavirus and its impact on world economy.



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