Bank Nifty volume PCR is calculated by dividing the trading volume of all the put option contracts on a given day by the trading volume of all the call option contracts..
Bank Nifty volume PCR is different from Bank Nifty OI PCR as OI PCR is calculated by dividing OI of put option contracts by OI of call option contracts.
Remember, unlike OI, which increases when more contracts are open and decreases when the contracts are settled, Volume increases with every transaction.
From the formula, we can derive that if the ratio is greater than 1, more bank nifty put contracts are open and if the ratio is less than 1, more bank nifty call option contracts remain unsettled.
This further helps us in gauging the direction of the market. If more put contracts are open, the market has an overall bearish sentiment. On the other hand, if more call option contracts are open, the market has an overall bullish sentiment.
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