Hello Community
I hope this message finds you well
I designed a python script to analyze put-call parity for a set of stocks and identify potential arbitrage opportunities. Please find it at my github account.
The results from the script can also be found there
This code was inspired by the Options Volatility Trading course.
Using this code, I was able to identify a few arbitrage opportunities, based on put call parity.
Beyond the transaction and liquidity constraints, what else make it difficult to actualize on these opportunities? How can I overcome them?
Best regards
Manogane
Dear Manogane,
Thank you for sharing your work on put-call parity arbitrage.
In addition to transaction costs and liquidity issues, here are a few more factors that can make it difficult to realize these opportunities in practice:
Capital and margin requirements:
Many arbitrage setups require shorting the stock or options, which leads to margin obligations. Even when a pricing discrepancy exists, the actual profit per contract may be small on a standard options contract before fees and slippage. The capital and margin required to hold such positions can be significant, and in many cases, the opportunity may not justify the effort unless the trade can be executed at scale.
Execution timing:
Put-call parity deviations are often short-lived and can vanish within minutes due to intraday market corrections. Since your script uses end-of-day data, some of the opportunities it identifies may no longer exist by the time the market opens the next day. Incorporating intraday or live data, combined with an automated execution system, can make detection more actionable.
Feel free to share any updates or new findings with the community.
Thanks,
Ajay
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