Put Call Parity

Put call parity refers to the principle of a static price relationship between the prices of a put option and a call option on the same underlying instrument with the same strike price and expiry date. If they are not the same then there is room for arbitrage. Put call parity applies only to European-style options which can be exercised only on expiry and not before. American-style options can be exercised at any time during the life of the contract.