The market remained extremely volatile during the 2009-10. The famous put-call ratio of the stock options market on the National Stock Exchange increased to 0.30 on March 2010 from 0.25 in April 2009. This reflects that a bearish sentiment prevailed in the market with sellers outnumbering buyers during the previous financial year.

Kishor P Ostwal, chairman & managing director, CNI Research, said: ?The nature of the market is highly volatile except for the last one month. This trend is reflected in the high volatility index.Whenever the market becomes more volatile, traders and investors try to hedge their positions through call & put trade to protect their losses.The rise in put-call ratio is an indication of the increased indecisiveness in the minds of investors and traders.? ?For a very short period, the put-call ratio can give fair indication of the market position, but by & large, it can give deceptive picture.?

The put-call ratio is one of the best gauges one can have in oversold (too bearish ) or overbought (too bullish) scenarios. It is a powerful technical trading indicator that monitors the stock and stock-index bets that speculators are making at any given time.When the ratio is high (above 1.00), the profusion of put options suggests investors expect the market to go down. Conversely, a low number (below 1.00) suggests investors expect the market to go up based on the volume of call options.

The put-call ratio of the stock options market on the NSE was 0.25 in April 2009 and decreased to 0.18 in June. But after June, the ratio increased to 0.26 in November 2009. Again in January 2010, the ratio decreased to 0.23. After that, it started increasing and finally reached a higher level of 0.30 in March this year.

The volume of call options have increased from 151.01 crore in April 2009 to 196.65 crore in September and decreased thereafter to 178.19 crore in March 2010.

The call option is an agreement that gives an investor the right (but not the obligation) to buy a stock, bond, commodity, or other instrument at a specified price within a specific time period.

On the other hand, volume of put options decreased from 37.23 crore during April 2009 to 28.65 crore during August and increased thereafter to 53.60 crore during March this year.

Here buyers have the right but not the obligation to sell the underlying security at a pre-determined price (called the strike or exercise price) on or before a particular date (expiry date).

Similarly in terms of value, call options showed an increase from Rs 22,168 crore during April last year to Rs 35,329 crore during March 2010. On the other hand, the value of put options showed a similar trend. The total value increased from Rs 9,259 crore in April to Rs 11,967 crore during March.

Top five companies in terms of call options in March 2010 are Reliance Industries, Tata Motors, Tata Steel, Hindalco Industries and Unitech.

Among these five companies, Tata Motors showed a significant increase in call options during March 2010 from the level of January after a marginal decline in February. Similarly, in terms of value of put options, the top five were Reliance Industries, Hindalco Industries, Tata Steel, Tata Motors and ICICI Bank. Here also one company namely Hindalco Industries showed a steady upward trend from the January 2010 level.