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What Is Put-Call Parity and How Is It Used to Identify Arbitrage Opportunities in Options Trading?

Put-call parity is an equation for options; if the market doesn't balance the formula, arbitrageurs do.
Greeks.Live23.11.25

What Is Put-Call Parity and How Is It Used to Identify Arbitrage Opportunities in Options Trading?

Put-call parity is a principle that defines the relationship between the price of a European put option and a call option, with the same underlying asset, strike price, and expiration date. The relationship is: Call Price – Put Price = Spot Price – Present Value of Strike Price.

If the prices of the options deviate from this formula, a risk-free arbitrage opportunity exists. An arbitrageur can simultaneously buy the underpriced asset combination and sell the overpriced one, locking in a profit.

How Do Arbitrageurs Profit from the Price Difference Caused by the X Y=k Formula?
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In the Context of This Formula, What Role Does Arbitrage Play in Enforcing the Price Ratio ‘K’?
What Is the Concept of “Put-Call Parity” and How Does It Apply to European Crypto Options?

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