Plots each of five major (All Stocks, Dow Jones, SP500, NASDAQ100, Russell 2000) put/call ratios as a lower indicator.
Put/Call ratios compare the Put (bearish) and Call (bullish) options trading across each of five general indices — All Stocks, Dow Jones, S&P 500, NASDAQ 100, and the Russell 2000. This ratio acts as a barometer for overall market sentiment, as traders with a more bearish view might seek downside protection (indicated by a heavier skew toward Puts).
Notably, the indicator is often used as a contrarian signal (suggesting to go long when the indicator expresses high uncertainty/fear, and to go short when expressing overconfidence), as small individual traders may seek options contract protection at an inopportune (read: late) time as a market drawdown is just about to recover, for example.
