KILLED · reflexive
Hypothesis
Extreme put/call volume ratios are contrarian sentiment signals for the underlying.
Math
$$ \text{PCR}_t = \frac{\text{put volume}_t}{\text{call volume}_t} $$
Method
BTC/ETH option PCR extremes vs forward returns.
Results
| PCR extreme → fwd return | weak, unstable |
| Hedging vs speculative flow | indistinguishable |
Crypto option flow mixes hedging and speculation indistinguishably, so a high PCR may be bearish bets or bullish-spot hedging. The ratio has no stable contrarian content here. Killed.
A sentiment ratio is only contrarian if you know the flow is directional speculation. When hedgers and speculators share the tape, the ratio means nothing.