What Is the Put-Call Parity Relationship in Terms of Delta?
Put-Call Parity is a relationship between the prices of a European Call option, a European Put option, and the underlying asset, all with the same strike and expiration. In terms of Delta, the parity relationship implies that the Delta of a Call option minus the Delta of a Put option must equal one (Call Delta – Put Delta = 1).
This is a foundational no-arbitrage principle.
Glossar
Synthetic Long Stock
Framework ⎊ A synthetic long stock, within the context of cryptocurrency derivatives, represents a strategy designed to mimic the payoff profile of a direct equity holding, but achieved through the utilization of options contracts.
Put-Call Parity
Relationship ⎊ Put-call parity describes a fundamental relationship between the price of a European call option, a European put option, and the underlying asset price, assuming they share the same strike price and expiration date.
Parity Relationship
Equilibrium ⎊ ⎊ A parity relationship in cryptocurrency derivatives signifies an arbitrage-free condition between related assets, typically a perpetual swap contract and the underlying spot market or futures contracts.
Put Delta
Characteristic ⎊ This measures the rate of change in a put option's premium in response to a one-unit increase in the underlying crypto asset's price, always yielding a negative value or zero.
Delta of a Put
Sensitivity ⎊ The delta of a put option quantifies the expected change in the option's premium for a one-unit adverse movement in the underlying cryptocurrency's price.
Put-Call Parity Relationship
Equilibrium ⎊ The put-call parity relationship, fundamentally, establishes a theoretical equilibrium between the prices of European put and call options with identical strike prices and expiration dates, alongside the underlying cryptocurrency asset.