Vyreon LabsMarket Measurements

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Put/Call Ratio: Volume vs Open Interest, Averages and History

How the put/call volume and open-interest ratios work, their 5/10/30-session averages and own-history percentile, and why bullish/bearish rules fail.

Reviewed · Sources at the end · How Vyreon measures
Vyreon's per-security reports are not live yet; this page describes what they will measure. Examples are illustrative.

The put/call ratio divides put options by call options for one security. The volume ratio uses contracts traded today; the open-interest ratio uses contracts still open. A ratio above 1 means more puts than calls, and on its own it says nothing about which way the price will go.

Put/Call Volume Ratio Vs Open-Interest Ratio

  • Put/call volume ratio: put contracts traded in the session divided by call contracts traded. It describes the day's trading and can swing a lot from one day to the next.
  • Put/call open-interest ratio: open put contracts divided by open call contracts. It describes positions still held, so it moves more slowly.

The two can point in different directions on the same day, so always check which basis you are reading. Open interest is finalized overnight by the clearing process, so the open-interest figure shown for a session reflects positions at the previous session's close.

Is A High Put/Call Ratio Bullish Or Bearish?

Popular rules call a high ratio "bearish" (traders are buying protection) or "contrarian bullish" (fear is overdone). Neither follows from the ratio alone. Puts are bought to hedge stock holdings, sold for income, and used in spreads where the put is only one leg. The ratio counts contracts. It does not show who bought, who sold, or why.

What counts as a "normal" ratio can also differ widely between securities. Broad index ETFs, which are used for hedging, can carry more puts than calls day after day, while other securities can sit well below 1. A fixed cutoff such as 0.7 or 1.0 means different things for different securities.

The more useful question is whether today's ratio is unusual for this security.

How Vyreon Measures It

  • Both ratios, every session: put contracts divided by call contracts, across all of the security's listed options with reported volume or open interest. It counts contracts, not dollars. When no calls traded, the ratio is withheld rather than reported as infinite.
  • Own-history percentile: the share of the previous 126 or 252 trading sessions with a lower ratio. Today is not included in its own comparison. The 126-session figure needs at least 63 usable sessions, and the 252-session figure needs at least 126.
  • 5-, 10- and 30-session averages: the mean of each day's ratio over the window ending today, not total puts divided by total calls. A window may be missing a day or two. An average is shown when at least 80% of its sessions are available (4 of 5, 8 of 10, 24 of 30).
  • Daily change: today's ratio minus the previous session's ratio, for each basis.

Illustrative example: suppose a security's volume ratio is 1.4 today, its 10-session average is 0.9, and today is higher than 95% of the last 126 sessions. Then put trading was unusually heavy relative to call trading for that security today. The numbers do not tell you whether those puts were hedges, speculation or closing trades.

What It Does Not Tell You

  • It is not a forecast and not a sentiment score.
  • It does not separate buyers from sellers, or opening trades from closing trades.
  • It counts every contract equally, whatever its price, strike or expiry.
  • Averages smooth out noise but lag. They describe recent activity and are not signals.

Related: open interest · unusual options activity · 0DTE options · relative volume

Sources

  • Jun Pan and Allen M. Poteshman, "The Information in Option Volume for Future Stock Prices", Review of Financial Studies (2006): built put/call ratios from non-public exchange data on buyer-initiated trades that opened new positions, and attributed the predictability they found to non-public information held by option traders. Vyreon's counts are public totals that do not separate buyers, sellers or opening trades.
  • Cboe, daily market statistics: total, index and equity put/call ratios.
  • The Options Clearing Corporation (OCC), Characteristics and Risks of Standardized Options, the options disclosure document: puts, calls and how they are used.

Reading a high or low put/call ratio as bearish or bullish is a market convention.