Business and Personal Finance Dictionary

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• PUT-CALL RATIO
  
  Since investors buy put options when they expect the market to fall, and call options when they expect the market to rise, the relationship of puts to calls, called the put-call ratio, gives analysts a way to measure the relative optimism or pessimism of the marketplace. The customary interpretation is that when puts predominate, and the mood is bearish, stock prices are headed for a tumble. The reverse is assumed to be true when calls are more numerous. The contrarian investor, however, holds just the opposite view-that by the time investors are concentrating on puts, the worst is already over, and the market is poised to rebound.
  
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