When put volume becomes excessive in relation to call volume, it is an indication of excessive bearishness in the market, which is usually bullish.

To calculate the Put/Call Ratio simply divide the number of puts by the number of calls. The raw ratio can then be smoothed into a moving average. We use a 10-day moving average.

Sometimes the CBOE final data is so late that we estimate the final volume based on the 3:00 PM ET CBOE tape, therefore, if you are using our Daily Market Summary to collect the data, you should be sure and get the corrected figures on the report the following day.

On our charts we reverse the scale so that oversold readings show as bottoms and overbought readings as tops.