166: Understanding The Put Call Ratio The Right Way
The Option Alpha Podcast
Kirk Du Plessis
4.8 • 1.2K Ratings
🗓️ 18 October 2019
⏱️ 22 minutes
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Summary
Show notes: https://optionalpha.com/show166
When it comes to market signals and timing indicators, the Put Call Ratio is one that naturally jumps to the top of many lists. Because the indicator looks at volume in both put and call options, the logical conclusion is that we can interpret the ratio to signal us from an impending top or possible market bottom. But, is that really the case, and if so, how should we use Put Call Ratios moving forward in our analysis. All this and more on this week's podcast episode.
Transcript
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| 0:00.0 | You're listening to the Option Alpha Podcast from Option Alpha.com where we show you how to make |
| 0:06.3 | smarter trades learn how the stock market really works and generate consistent monthly |
| 0:11.2 | income. Now your host and head trader at option alpha.com, Kirk depluses. |
| 0:17.0 | Hey everyone, this Kirkkey again from option alpha, working every single week to make this the most popular |
| 0:24.1 | investing podcast offered online because it's based on one thing and one thing only and that's |
| 0:28.8 | helping you guys make smarter trades. |
| 0:30.7 | So again, thank you so much for tuning in today on today's show. We are going to be talking |
| 0:34.7 | through the put call ratio, trying to understand what the ratio is, how we can use it correctly, |
| 0:39.7 | if we should be using it at all as part of our trading strategy. And so I think I want to go through a lot of this today on the weekly show. |
| 0:45.8 | I figured that this topic really deserves a little bit more attention than a traditional daily podcast because we do get a lot of questions about put call |
| 0:53.8 | ratios and we get a lot of emails from people asking if we use it and if we do how we |
| 0:58.8 | use it or what levels we should be looking at so I want to dive deep into this today on the weekly |
| 1:04.2 | podcast. As always if you want additional resources and links as we go through |
| 1:08.4 | this or some of the reviews and synopsis of the put-call ratio it'll all be |
| 1:12.4 | available on the website on the show |
| 1:14.0 | notes page option off of com slash show 166 again that's just the number 166 option |
| 1:19.2 | offer com slash show 166 all right so let's dive into this by first trying to get an understanding and an idea of how the |
| 1:27.3 | political ratio is determined, how it's basically calculated. |
| 1:30.4 | It's actually very simple, just very simple division that you have to do. You actually don't even have to do it. It's done for you. You can use a lot of services that do it. |
| 1:37.0 | Why Charge does it. Think or Swim does it. Many other brokerage platforms do it for you. |
| 1:41.0 | But all you basically do is you take the total volume of put |
| 1:44.6 | options that were traded. You can do it on a daily basis, a weekly basis. Most |
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