Put-Call Parity
Definition
A fundamental no-arbitrage relationship defining the fair price relationship between European call and put options with the same underlying, strike price, and expiration date.
Formula / Rules
C − P = S − Ke^(−rT)
Example
Any deviation from put-call parity creates risk-free arbitrage opportunities that market makers quickly eliminate.
Related Terms
Frequently Asked Question
What is Put-Call Parity?
Put-call parity is a no-arbitrage relationship: C − P = S − Ke^(−rT). It defines the equilibrium pricing between European calls and puts. Deviations create arbitrage opportunities.
APA Citation
Last updated:
· Source: VixShield Trading Glossary — From SPX Mastery by Russell Clark
⚠️ Not financial advice. This definition is educational content from the SPX Mastery book series by Russell Clark (VixShield). Past performance is not indicative of future results. Trading options involves substantial risk of loss and is not appropriate for all investors. Always paper trade before risking real capital.