Course Name: Options Trading Strategies In Python: Basic, Section No: 2, Unit No: 11, Unit type: Video
Sure, Akshay!
Put-call parity is a basic concept in options trading that shows the relationship between the price of a call option, the price of a put option, and the underlying asset. Put-call parity states that the price of a call option plus the present value of the strike price is equal to the price of a put option plus the current price of the underlying asset.
For example, let's say that a stock is currently trading at $100, and there is both a call option and a put option available with a strike price of $100 and an expiration date of one year from now. If the call option is priced at $10 and the put option is priced at $7, then according to put-call parity, the present value of the strike price is $3 ($10 - $7 + $100 = $103). If the present value of the strike price were not $3, then there would be an opportunity for arbitrage (risk-free profit), and traders would take advantage of it until put-call parity is restored.
You can learn more about Put-Call Parity in this blog.
Hope this helps!
Thanks,
Rushda Ansari