Put/call ratio, explained
The put/call ratio divides put activity by call activity. Below roughly 0.7 leans bullish; above roughly 1.0 leans defensive. The nuance is in which activity you are dividing.
Volume vs open interest
The volume ratio uses contracts traded today — it is a snapshot of fresh intent and moves fast. The open-interest ratio uses contracts still outstanding — it is the accumulated standing position and moves slowly. They can disagree, and the disagreement is often the interesting part.
Reading the thresholds
Ratios are relative to the name, not absolute. A ticker whose options crowd is structurally hedge-heavy will sit above 1.0 all year without meaning anything. What matters is today against that name’s own baseline.
Why extremes are read as contrarian
When the ratio hits an extreme, positioning is crowded on one side. Crowded positioning is fragile positioning: the marginal buyer is exhausted, so the move that hurts the most people becomes the easier one.
Pairing it with flow
A ratio tells you the balance; it does not tell you who moved. Reading it alongside where the large premium actually printed is what turns it from trivia into context.