Explain the Concept of “Put-Call Parity” in Options Pricing

Put-call parity is a fundamental principle that defines the relationship between the prices of a European call option, a European put option, and the underlying asset, all sharing the same strike price and expiration date. The relationship is expressed as: Call Price + Present Value of Strike Price = Put Price + Spot Price.

Any deviation from this equation presents a risk-free arbitrage opportunity.