PCR Bollinger breakout
The put-call ratio (PCR) compares open interest in NIFTY puts with that in calls. This strategy treats the PCR like a price chart: it draws a 20-day Bollinger band around it and trades NIFTY futures when the PCR breaks out. A PCR spike above the upper band, read as heavy put writing, is a buy; a drop below the lower band is a sell. The trade ends when the PCR returns to its average or a 1% stop is hit.How it trades
Results
PRE-BUILT · DEFAULTSWhere it made and lost money
The result hinged on whether NIFTY actually moved after the PCR signal. In this test the 5 trades held while NIFTY rose more than 1% made ₹1,35,587, but the 15 held while it stayed within 1% lost ₹95,260: without a real move, the PCR drifted back to its average and the trade closed at a loss or hit the 1% stop. Entries on quiet sessions lost ₹57,389 over 14 trades with a 14% win rate. Entries on NIFTY weekly expiry days lost ₹74,391 over 10 trades, while other days made ₹57,196 over 21: the PCR read on the day after an expiry reflects a new series and is noisier.
About this strategy
- Each day at 15:20, compute the PCR: total put open interest divided by total call open interest on the nearest NIFTY weekly expiry, skipping a series on its own expiry day.
- Draw a band around the last 20 daily readings: the average plus and minus 1.5 standard deviations.
- When flat, if the PCR crosses above the upper band, buy one lot of near-month NIFTY futures at 09:20 the next session; if it crosses below the lower band, sell one lot.
- Place a stop 1% of the entry price against the trade, counted from the original entry even across rolls.
- Exit at 15:20 once the PCR crosses back over its 20-day average: below it for a long, above it for a short.
- On futures expiry day, close at 15:15 and re-open in the next month's contract at the next session's first tick.
- After an exit, the next band cross can open a new trade.
Why traders use it
PCR is one of the most watched sentiment readings in Indian options. A sharp rise in put open interest often means traders are writing puts, betting the market will hold up, so an unusually high PCR is read as bullish. Measuring 'unusual' against a Bollinger band adapts to whatever PCR level is normal at the time, rather than using fixed thresholds like 1.3 or 0.7.
The year in plain words
On NIFTY futures from 1 Oct 2025 to 30 Sep 2026, the strategy produced 32 trade records and won only 31% of them, losing ₹18,488 before costs (profit factor 0.92). Wins were large, averaging ₹21,332 with one of ₹73,326, but losers averaged ₹10,537 and were more than twice as common. 21 trades ended on the PCR returning to its average, 9 on the 1% stop and 2 at a monthly roll. October and April made ₹68,595 and ₹57,697, but seven of the 11 months traded lost money and the drawdown reached ₹1,13,318. After ₹20 per order and bid-ask slippage the loss is ₹27,796.
What the settings do
Risks
- PCR around weekly expiries is noisy because open interest shifts between series.
- Reading high PCR as bullish is a contrarian assumption; heavy put buying can also lift PCR before a fall.
- Positions are held overnight, so the 1% stop can be gapped through.
- With about 2-3 trades a month, a few large trades decide the year.
Who it suits
Positional futures traders who follow option-chain sentiment, want a rule-based way to use PCR, and have margin for a NIFTY lot through drawdowns of around ₹1 lakh.
Questions traders ask
What does a high PCR mean in NIFTY?
A high put-call ratio means there is much more open interest in puts than calls. Many traders read this as put writers expecting the market to hold up, which is mildly bullish, though it can also reflect hedging ahead of a fall.
Why put Bollinger Bands on the PCR?
The normal PCR level drifts over time. A band around its own recent average shows when today's reading is unusually high or low compared with the last 20 days, instead of relying on fixed levels.
Is the PCR Bollinger breakout strategy profitable?
In this backtest on NIFTY futures from 1 Oct 2025 to 30 Sep 2026 it lost ₹18,488 before costs and ₹27,796 after ₹20 per order and bid-ask slippage, with a maximum drawdown of ₹1,13,318 before costs. Past results do not guarantee future results.
Which expiry is the PCR taken from?
From the nearest NIFTY weekly expiry, which falls on Tuesday. On the expiry day itself, the strategy uses the next series instead, because open interest in the expiring series collapses into settlement.