Optionslatte put/call ratio is very important to track put and call volume. It is often used as a contrarian indicator.
During the market, if the put/call ratio fluctuates between 0.50 and 1.30, then these numbers can be said to be the extremes for the market and used as threshold levels. If the put/call ratio spikes above or below these levels, then a spike extreme has occurred and a reversal is imminent. A spike above 1.30 would indicate excessive bearishness and a spike below 0.50 would be excessive bullishness.
When traders are too bullish (.50% or below)(call buying outpaces put buying) then options traders tend to turn bearish.
NOTE: Look for shorting opportunities.
When traders are bearish (1.30% or above)(put buying outpaces call buying) options traders tend to be bullish
NOTE: Look for buying opportunities.
Puts and calls are both directional trades, that is, trades that profit from price movement in only one direction, up or down. Optionslatte Put/Call Ratio can detect an extreme number of puts or calls. As market sentiment (In Stocks, Indexes, etc) turns bearish, puts will increase as traders and investors buy insurance against the feared meaning put volume will increase Note: Start looking for a short term bottom. Conversely, as sentiment improves and traders commit money to bullish speculation, calls will increase. Note: start looking to liquidate out of a trade or short the market. When the market reaches excessive levels in one direction or the other, the chance of a reversal increases.