Put-Call Parity
The relationship fixing the price of a European call and put with the same strike and expiry relative to the underlying.
Formula
Call Price - Put Price = Spot Price - Present Value of Strike
Unit
₹
In depth
Parity is not a model but an arbitrage identity: if it is violated, a riskless profit can be locked in by trading the four instruments, so market prices are pulled back into line. It explains why an at-the-money call costs more than an at-the-money put in a positive interest rate environment — the difference is the carry on the strike. The relationship also underlies synthetic positions, since any three of the four instruments can replicate the fourth. It holds strictly for European options and only approximately for American ones, where early exercise breaks the equivalence.
Worked example
Spot 24,000, strike 24,000, 30 days at 7%: the present value of the strike is 24,000 / 1.005753 = 23,862. Parity requires Call - Put = 24,000 - 23,862 = 138, so a call at 300 implies a put at 162.
Illustrative figures, chosen so the arithmetic is easy to follow. Not a live price and not a valuation of any company.
Educational reference only
This entry explains what “Put-Call Parity” means. It is not investment advice and not a recommendation to buy or sell any security. Any numbers above are illustrative, not live prices, and nothing here predicts price direction or rates a stock. Consider your own circumstances and consult a SEBI-registered investment adviser before acting.