September 3, 2020
With the rapid growth of the options market, the simple Put/Call Ratio has become a staple technical indicator. Simply dividing total put volume by total call volume allegedly provides insights into investor sentiment, or so it goes. But, the problem with the Simple P/C Ratio’s validity is it tells us absolutely nothing about trade direction. Bearish buy and bullish sell orders in puts are lumped into simple volume, making it ambiguously useless.