Data through close

Put/call ratio and put-call parity

The put/call ratio

The put/call ratio divides put activity by call activity. There are two common versions:

  • Volume-based: puts traded today ÷ calls traded today. Noisy, reacts within a session.
  • Open-interest-based: put open interest ÷ call open interest. Slower, reflects positions actually held.

A ratio above 1 means more puts than calls. For index products a ratio near 1 is ordinary, because puts are bought as insurance; for single stocks the typical ratio is lower, often 0.5 to 0.8. What matters is the change against the ticker’s own history, not the absolute number: a spike in the put/call ratio is a spike in hedging or bearish speculation.

The ratio says nothing about who holds the positions. A high put ratio can be a market maker short puts to customers who bought protection, and the hedge that market maker runs is what moves the stock, which is why this site looks at open interest as a portfolio rather than at the ratio alone.

This site currently shows the count of listed call contracts versus put contracts on each ticker page and the call/put extremes screen. The open-interest-based ratio by side is a planned addition.

Put-call parity

For European options with the same strike and expiry, a call and a put are tied together by an arbitrage relation:

C − P = F·e^(−rT) − K·e^(−rT)

where C and P are the call and put prices, K the strike, F the forward price of the underlying, r the risk-free rate and T the time to expiry. In words: a long call plus a short put is the same thing as owning the forward and borrowing the strike.

Two consequences are useful in practice:

  1. Across strikes, C − P is a straight line in K. Its slope gives the discount factor (and so the interest rate the market is using), and its intercept gives the forward. That is how a market-implied risk-free rate and a market-implied forward, including dividends and borrow costs, can be read straight off an options chain.
  2. The strike where C = P is the forward price. Above it calls are cheaper than puts, below it the reverse.

American-style single-stock options break the equality slightly (early exercise), so the relation is used on index options, which are European, to read the rate, and on each stock’s own chain to read its forward.

Open interest · Max pain · Methodology