What Is Volume PCR? Understanding the Volume Put Call Ratio in Options Trading

Price changes in the stock market only tell part of the story. Traders also look at volume to get a better picture of what's going on. Volume shows how many people are involved and how strongly traders believe in a move. The Volume Put Call Ratio, or Volume PCR, is one of the most popular ways to gauge how the market feels about options trading.

In simple terms, Volume PCR looks at how many call options and put options are traded during a trading session. The formula is easy:

Volume PCR = Total Call Volume ÷ Total Put Volume

It shows new activity, not old positions carried over, because it is based on daily trading volume.

If 1.5 million put contracts and 1 million call contracts are traded in a day, the Volume PCR would be 1.5. That means that more people were trading puts than calls. The ratio goes below 1 when call volume is higher than put volume.

How traders read volume PCR
Things get interesting when you figure out what the number means.

PCR over 1 means that there are more put options than call options. This often means that the market is scared or defensive.

PCR less than 1: More calls than puts. This usually means that people are hopeful or bullish.

But experienced traders don't always take this at face value. When feelings get too extreme, markets often go against the majority.

If too many people buy puts, it could mean that they are panicking. And sometimes, when panic is at its worst, markets go back up. On the other hand, a lot of call activity can mean too much confidence, which could cause a short-term drop.

Volume PCR vs. Open Interest PCR
Don't mix up Volume PCR with Open Interest PCR.

Volume PCR shows how much trading is going on right now.

The Open Interest PCR shows the ratio of all open put and call positions.

Volume PCR only looks at new trades, so it reacts more quickly to changes in short-term sentiment. That makes it very helpful for people who trade during the day and those who want to make quick money.

Why Extreme Readings Are Important
There is no one "perfect" PCR number for everyone. Conditions in the market change. Traders don't look at fixed levels; instead, they compare current readings to historical averages.

Very high PCR readings could mean that people are too negative.

Very low PCR readings could mean that someone is very hopeful.

When sentiment gets really high or really low, the chances of a reversal often go up.

How to Use Volume PCR the Right Way
You shouldn't use volume PCR by itself. It works best when used with:

Levels of support and resistance

Looking at price action

Direction of the trend

Data on open interest

For example, traders on exchanges like the National Stock Exchange often keep an eye on Volume PCR along with important index levels when trading index options. If the market is going down quickly and PCR spikes, it could mean that people are buying puts out of fear. If the selling pressure starts to fade, there may be a short-covering rally.

Recognizing this change early gives disciplined traders time to get ready instead of acting on their feelings.

Last Thoughts
Volume PCR is a strong short-term measure of mood. It doesn't tell you when to buy or sell, but it does tell you how people are feeling about the market—whether they're scared or hopeful.

Volume PCR can be a useful tool for traders when used with good technical analysis and risk management.