The put/call ratio divides put volume by call volume. Higher is supposed to mean more fear. It is one of the most widely quoted sentiment gauges, and one of the easiest to read backwards.
On 28 July 2026 the Nikkei 225 fell 3.95%. The put/call ratio fell too — from 1.995 to 1.387. Read naively, the market became less fearful during a sharp sell-off.
The components explain it:
| Prior day | 28 July | Change | |
|---|---|---|---|
| Put volume | 21,148 | 35,728 | ×1.69 |
| Call volume | 10,603 | 25,764 | ×2.43 |
| Ratio | 1.995 | 1.387 | −0.61 |
Put activity rose sharply. Call activity rose more. In a fast decline, traders take profit on puts they already own, buy cheap calls for a bounce, and close calls that are now far out of the money — all of which lift call volume. The ratio fell while hedging demand was rising.
A ratio moves on its denominator as readily as its numerator. Without both raw volumes you can read the day exactly backwards, which is why we publish put and call volume next to the ratio rather than the ratio alone.
Textbooks treat 1.0 as balance. For Nikkei 225 large-contract options, our measured average is 1.57. Institutional downside hedging is structural and permanent, so the ratio lives above 1.0 in calm markets and tells you nothing by being there.
Judge it against its own recent range instead. Readings from the week of 17 August 2026 show how wide that range is: 1.956, 1.818, 2.279, 1.017, 1.384. A single print carries very little information.
Nikkei options trade in large (×1,000 yen) and mini (×100 yen) sizes. Over the same sample, large averaged 1.57 and mini averaged 0.91 — mini frequently sits below 1.0.
Large contracts are dominated by institutions buying downside protection. Mini carries a much higher share of retail flow, which leans toward upside. The two ratios measure different populations, and the gap between them is more informative than either alone. When mini rises toward large, retail is hedging too.
Volume counts activity; open interest counts commitment. Occasionally the second is much clearer.
On 20 August 2026, Nikkei call open interest went from 101,116 to 101,103 contracts — a net change of 13 contracts. Puts added 1,721 the same day. Across the previous month call open interest had risen by 1,000 to 6,000 contracts on a typical day, so this was not a quiet session in general; it was a session where only the upside stopped being built. The put/call volume ratio that day was 1.017, which looks perfectly balanced and says nothing about it.
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