What is Put-Call Parity?
How Does Put-Call Parity Work?
In theory and in practice, the risk/return relationship between puts and calls on the same security should be identical. For example, a long call (i.e., an option purchase that assumes that the price will go up) has the same risk/return (and therefore, price) as a short put (i.e., an option purchase that assumes that the price will go down). The following table illustrates the balance or parity between puts and calls on the same option.
Why Does Put-Call Parity Matter?
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