The put/call ratio measures the relationship between put and call option volume in a market. It was originally applied to index and equity options traded at the Chicago Board Options Exchange (CBOE), but it can be calculated for any market with sufficient option volume.

The following analysis shows how the Standard and Poor’s Despositary Receipts (SPY), which reflect the S&P 500 index, behaved in the first two weeks after extreme daily highs and lows in both OEX and equity put/call ratios since 1997.