options: Learn With ETMarkets: Options demystified 401 – Market sentiment
Market sentiment derived from options can be assessed using the Put-Call Ratio (PCR). There are two types of PCR: volume-based and open interest-based. The volume-based PCR provides short-term analysis, while the open interest-based PCR gives longer-term insights. Traders use the PCR as a contrarian indicator, with a ratio above 1 suggesting bearish sentiment and a ratio below 1 suggesting bullish sentiment. The Option Chain is another tool that traders use to gauge market sentiment by analyzing factors such as open interest, volume, bid-ask spread, and implied volatility. The Max Pain theory ...
Source: indiatimes.com
