Put-call parity relationship

Definition:

The relationship between the price of a put and the price of a call on the same underlying security with the same expiration date, which prevents arbitrage opportunities. Holding the underlying stock and buying a put will deliver the exact payoff as buying one call and investing the present value (PV) of the exercise price. The call value equals C = S + P - PV(k).

Investing Essentials


Copyright © 2011 Campbell R. Harvey, Professor of Finance, Fuqua School of Business at Duke University

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Bear spread

Applies to derivative products. Strategy in the options or futures markets designed to take advantage of a fall in the price of a security or commodity. A bear spread with call options is created by... Read More

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