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Open Interest Analysis · Unit 3

Call and Put Positioning

5 min read

What this unit covers

Learn to read call and put open interest, including the Put-Call Ratio, as a gauge of sentiment, not a guarantee of direction.

By the end you will be able to

  • Explain what open interest represents and why it is not a price forecast.
  • Calculate the Put-Call Ratio (PCR) from given call and put open interest figures.
  • Interpret a put wall or call wall as clustered positioning, not a guaranteed floor or ceiling.

How it starts: Two Piles of Contracts

  1. You open an option chain before deciding whether to add to a position.
  2. Call contracts add up to 1,20,000 and put contracts add up to 1,80,000.
  3. Does the larger pile of puts tell you where the price is going?

Words you will meet

Put-Call Ratio (PCR)
Total put open interest divided by total call open interest, a snapshot of current positioning.
Open interest
The number of option contracts at a strike that are still open, not yet closed out.
Put wall
A strike where put open interest is unusually heavy compared to nearby strikes.
Call wall
A strike where call open interest is unusually heavy compared to nearby strikes.

In this module: Open Interest Analysis

  1. Open Interest Additions and Unwinding
  2. Price-OI Combinations
  3. Call and Put Positioning (this unit)
  4. OI Walls, Shifts, and Event-Risk Limits

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