How Can a Violation of Put-Call Parity Create an Arbitrage Opportunity in Crypto Options?

A violation occurs when the theoretical relationship (C + K e^-rT = P + S) does not hold true in the market. If the left side is greater than the right side, an arbitrageur can sell the overpriced portfolio (short call, long put) and buy the underpriced one (short asset, long bond).

This is a risk-free trade, locking in the price difference as profit. Arbitrageurs quickly exploit these mispricings, which is why parity violations are typically short-lived.