Options Ratio is basically the number of puts traded divided by the number of calls. It can be applied to an individual stock, a sector, an index, or an entire market.
Put/call ratios are generally used in contrary manner. For example, when ratios reach extremely high levels, put buying is unusually high and it could be an indication that pessimism is too high. From a contrary view, high levels of pessimism are often a good time to turn bullish.
See also Ratio Back Spread
