A put/call ratio of .70 indicates:
A)puts have a cost 70% less than the cost of calls.
B)there are 7 puts purchased for every one call purchased.
C)there are 70% more puts purchased than calls.
D)there are 7 puts purchased for every 10 calls purchased.

Question

Quizplus · Accepted Answer

A put/call ratio of .70 means that for every 10 calls purchased, 7 puts are purchased. Therefore, the best choice is D, which states that there are 7 puts purchased for every 10 calls purchased. Options A and C are incorrect because they suggest a percentage difference in costs or quantities, which is not accurate. Option B is incorrect because it suggests that for every one call purchased, 7 puts are purchased, which is not accurate either.

A Put/call Ratio of .70 Indicates