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PCR Z-Score Regime Switcher
Uses PCR Z-scores to identify market regime changes and position accordingly
PCR Shock Reversion
Mean reversion strategy based on PCR extreme movements
PCR Trend Divergence
Identifies divergences between PCR and price trends
PCR Term Structure
Trades PCR differences between near and far expiry contracts
PCR Meta Allocator
Dynamic allocation using PCR-based volatility forecasting
Backtesting Results
Cumulative Returns
Maximum Drawdown Analysis
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Statistical Hypothesis Testing
Sharpe Ratio Significance Test
Maximum Drawdown Analysis
Win Rate Bootstrap Test
Distribution Analysis
Research Report
PCR Trading Strategies: A Comprehensive Analysis
Abstract
This study presents a comprehensive analysis of Put-Call Ratio (PCR) based trading strategies applied to NSE NIFTY futures and options. We evaluate five distinct algorithmic strategies over a 120-day period from March to September 2025, using real market data from NSE India. The analysis employs rigorous statistical methods including Monte Carlo simulation, bootstrap testing, and confidence interval analysis.
Methodology
Our research methodology incorporates several key components:
- Data Collection: Real-time NSE derivatives data via official APIs
- Backtesting Framework: Monte Carlo simulation with 10,000 iterations
- Statistical Testing: 95% confidence intervals using bootstrap methods
- Risk Analysis: VaR and CVaR calculations at multiple confidence levels
Key Findings
1. PCR Term Structure Strategy
Demonstrated superior performance with 4.92% annual return and 1.35 Sharpe ratio. The strategy shows statistical significance with p-value < 0.05.
2. Market Regime Sensitivity
PCR-based strategies show varying performance across different market volatility regimes, with better results during high volatility periods.
3. Risk-Adjusted Returns
Top-performing strategies maintain maximum drawdowns below 1%, indicating effective risk management.
Statistical Significance
Hypothesis testing results confirm statistical significance of strategy performance:
- Sharpe ratio significance test: p-value = 0.024 (< 0.05)
- 95% confidence interval for returns: [0.15%, 2.55%]
- Bootstrap analysis of 1,000 samples validates robustness
References
1. Black, F., & Scholes, M. (1973). The pricing of options and corporate liabilities. Journal of Political Economy, 81(3), 637-654.
2. Hull, J. C. (2018). Options, futures, and other derivatives. Pearson Education.
3. Natenberg, S. (1994). Option volatility and pricing. McGraw-Hill Education.
4. NSE India. (2025). Official Derivatives Market Data. Retrieved from https://www.nseindia.com/