PCR (Put-Call Ratio) – The Market Sentiment Radar
✅ What is PCR?
PCR stands for Put-Call Ratio, a popular sentiment indicator in the options market. It tells you whether traders are buying more puts (bearish bets) or more calls (bullish bets).
What is IV?
Implied Volatility (IV) is the market’s forecast of how volatile a stock or index might be in the future. It doesn’t tell direction, but only how fast or wild the moves could be.
✅ How does IV affect option prices?
Higher IV = Higher Option Premiums
Lower IV = Lower Option Premiums
Think of IV as the “air” in a balloon. More air (IV) = bigger premium (balloon).
✅ Why IV is Crucial:
Entry Timing: You want to buy options when IV is low (cheap premiums).
Exit Strategy: You want to sell options when IV is high (expensive premiums).
IV spikes before big events – like earnings, RBI policy, Budget, Fed meetings, etc.
✅ Example:
You buy a Nifty 20000 CE when IV is 14%. Then IV jumps to 22% even if price doesn’t move much.
Your option gains value because of IV expansion (called Vega Gain).
✅ IV vs HV:
IV: What market expects.
HV (Historical Volatility): What already happened.
When IV > HV = Overpriced Options.
When IV < HV = Underpriced Options.
VIX (Volatility Index) – The Fear Gauge of India
✅ What is VIX?
VIX is the Volatility Index, often called the "Fear Index". In India, we use India VIX, which measures expected volatility of Nifty 50 over the next 30 days.
✅ How is VIX calculated?
India VIX is derived from the option prices of Nifty 50 – mainly ATM (At-The-Money) options. It reflects market’s fear level or confidence.
✅ Interpretation:
VIX < 12 → Calm, low volatility (complacent market)
VIX 12–18 → Normal volatility
VIX > 20 → High fear, high volatility
🔁 VIX is inversely correlated with Nifty:
VIX rises → Nifty tends to fall
VIX falls → Nifty tends to rise
✅ Smart Usage of VIX:
Options Selling: When VIX is high, sell far OTM options (premium decay faster).
Options Buying: When VIX is low, buy options expecting breakout or event-driven moves.
Event Hedge: Spike in VIX signals market is anticipating big movement – ideal for straddle/strangle trades.
✅ Real Market Scenario:
During Budget day or unexpected geopolitical news, VIX may shoot up from 13 to 22 in a day.
Smart traders pre-position strangles or reduce exposure when VIX hits extremes.
🔷 Putting It All Together – Mastery Strategy
Let’s combine PCR, IV, and VIX for smart institutional-level setups.
🔹 1. PCR + VIX Confluence
PCR High + VIX High = Too much fear → Possible market bottom → Buy signal
PCR Low + VIX Low = Overconfidence → Possible correction → Sell signal
🔹 2. IV Crush Trade
Before event (high IV) → Sell options → Capture premium decay post-event
After event (low IV) → Buy directional options → Lower premium, better RR
🔹 3. Directional Bet with PCR + IV
Rising PCR + Rising IV = Building bearish pressure → Bearish bias
Falling PCR + Falling IV = Bullish optimism → Bullish bias
✅ What is PCR?
PCR stands for Put-Call Ratio, a popular sentiment indicator in the options market. It tells you whether traders are buying more puts (bearish bets) or more calls (bullish bets).
What is IV?
Implied Volatility (IV) is the market’s forecast of how volatile a stock or index might be in the future. It doesn’t tell direction, but only how fast or wild the moves could be.
✅ How does IV affect option prices?
Higher IV = Higher Option Premiums
Lower IV = Lower Option Premiums
Think of IV as the “air” in a balloon. More air (IV) = bigger premium (balloon).
✅ Why IV is Crucial:
Entry Timing: You want to buy options when IV is low (cheap premiums).
Exit Strategy: You want to sell options when IV is high (expensive premiums).
IV spikes before big events – like earnings, RBI policy, Budget, Fed meetings, etc.
✅ Example:
You buy a Nifty 20000 CE when IV is 14%. Then IV jumps to 22% even if price doesn’t move much.
Your option gains value because of IV expansion (called Vega Gain).
✅ IV vs HV:
IV: What market expects.
HV (Historical Volatility): What already happened.
When IV > HV = Overpriced Options.
When IV < HV = Underpriced Options.
VIX (Volatility Index) – The Fear Gauge of India
✅ What is VIX?
VIX is the Volatility Index, often called the "Fear Index". In India, we use India VIX, which measures expected volatility of Nifty 50 over the next 30 days.
✅ How is VIX calculated?
India VIX is derived from the option prices of Nifty 50 – mainly ATM (At-The-Money) options. It reflects market’s fear level or confidence.
✅ Interpretation:
VIX < 12 → Calm, low volatility (complacent market)
VIX 12–18 → Normal volatility
VIX > 20 → High fear, high volatility
🔁 VIX is inversely correlated with Nifty:
VIX rises → Nifty tends to fall
VIX falls → Nifty tends to rise
✅ Smart Usage of VIX:
Options Selling: When VIX is high, sell far OTM options (premium decay faster).
Options Buying: When VIX is low, buy options expecting breakout or event-driven moves.
Event Hedge: Spike in VIX signals market is anticipating big movement – ideal for straddle/strangle trades.
✅ Real Market Scenario:
During Budget day or unexpected geopolitical news, VIX may shoot up from 13 to 22 in a day.
Smart traders pre-position strangles or reduce exposure when VIX hits extremes.
🔷 Putting It All Together – Mastery Strategy
Let’s combine PCR, IV, and VIX for smart institutional-level setups.
🔹 1. PCR + VIX Confluence
PCR High + VIX High = Too much fear → Possible market bottom → Buy signal
PCR Low + VIX Low = Overconfidence → Possible correction → Sell signal
🔹 2. IV Crush Trade
Before event (high IV) → Sell options → Capture premium decay post-event
After event (low IV) → Buy directional options → Lower premium, better RR
🔹 3. Directional Bet with PCR + IV
Rising PCR + Rising IV = Building bearish pressure → Bearish bias
Falling PCR + Falling IV = Bullish optimism → Bullish bias
Hello Guys ..
WhatsApp link- wa.link/d997q0
Email - techncialexpress@gmail.com ...
Script Coder/Trader//Investor from India. Drop a comment or DM if you have any questions! Let’s grow together!
WhatsApp link- wa.link/d997q0
Email - techncialexpress@gmail.com ...
Script Coder/Trader//Investor from India. Drop a comment or DM if you have any questions! Let’s grow together!
Related publications
Disclaimer
The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.
Hello Guys ..
WhatsApp link- wa.link/d997q0
Email - techncialexpress@gmail.com ...
Script Coder/Trader//Investor from India. Drop a comment or DM if you have any questions! Let’s grow together!
WhatsApp link- wa.link/d997q0
Email - techncialexpress@gmail.com ...
Script Coder/Trader//Investor from India. Drop a comment or DM if you have any questions! Let’s grow together!
Related publications
Disclaimer
The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.