The put-call ratio is an important indicator used by traders to assess market sentiment and potential price movements. It compares the number of put options (which bet on a decline in asset prices) to call options (which bet on an increase in prices). A high put-call ratio suggests that more investors are expecting the market to fall, signaling bearish sentiment, while a low ratio indicates optimism and potential for a market rise, as more traders are betting on price increases. Traders often use this ratio to gauge market sentiment and adjust their strategies accordingly. For example, an extremely high put-call ratio might indicate that the market is oversold, potentially signaling a buying opportunity, while a very low ratio could suggest overconfidence, warning of potential market corrections. Understanding the put-call ratio can give investors valuable insights into market trends and help refine their trading decisions.