The Put/Call Ratio is a financial metric that compares the volume of put options to call options traded in the market. A put option gives the holder the right to sell an asset at a specified price, while a call option gives the right to buy. This ratio helps investors gauge market sentiment; a high ratio indicates bearish sentiment, suggesting more investors expect prices to fall, while a low ratio indicates bullish sentiment, suggesting more investors expect prices to rise. Traders often use the Put/Call Ratio as a contrarian indicator. For example, if the ratio is extremely high, it may signal that the market is overly pessimistic, potentially indicating a buying opportunity. Conversely, a very low ratio may suggest excessive optimism, which could precede a market correction. Understanding this ratio can help investors make more informed decisions regarding their trading strategies.