The put-call ratio is a key indicator used by traders to assess market sentiment and predict potential price movements. It is calculated by dividing the total number of put options traded by the total number of call options traded within a specific period. A higher put call ratio (greater than 1) suggests that more put options are being bought, indicating a bearish market sentiment, as investors anticipate a decline in asset prices. On the other hand, a lower ratio (less than 1) implies more call options are being traded, pointing to a bullish sentiment, with traders expecting prices to rise. The put-call ratio is often used to gauge investor fear or optimism—extreme values can signal overbought or oversold conditions. For example, an unusually high ratio may indicate excessive bearishness, which could suggest a market reversal. Conversely, a very low ratio might suggest overconfidence, potentially signaling a market correction. While the put-call ratio provides valuable insights, it is important to consider it alongside other technical indicators and market analysis to make well-informed trading decisions. By monitoring the put-call ratio, traders can better anticipate market trends and adjust their strategies accordingly.