Put Call Ratio
Put Call Ratio — Relative demand for downside protection versus upside participation.
Definition
Put Call Ratio refers to relative demand for downside protection versus upside participation. Keep that definition fixed when comparing series, managers, or regimes — renaming the same tape does not create a new signal.
Why it matters
Options and futures embed views on vol, skew, and path that cash markets only hint at. When relative demand for downside protection versus upside participation shifts, related hedges, limits, and narratives usually need an explicit update rather than a quiet assumption.
Case
Suppose a desk is positioned for the opposite of what put call ratio is saying. If relative demand for downside protection versus upside participation moves against that book, the first question is not “is the story clever?” but whether size, hedges, and stop logic still match the observation.
How to read it
State the expiry and Greek exposure; unmarked vol or pinning effects rewrite the thesis. Prefer a short written null hypothesis for Put Call Ratio: what would falsify the current reading in the next window?