What is Put Call Parity? Put Call Parity is relationship is based on the fact that a call option gives the holder the right to buy the underlying asset at the strike price, while a put option gives the holder the right to sell the underlying asset at the strike price. If the call option is exercised, the holder can buy the underlying asset at the strike price and then sell it immediately at the current spot price, realizing a profit equal to the difference between the two prices. This profit is equal to the loss that the put option holder would incur if they were to exercise their option to sell the asset at the strike price. Put-call parity can be used to derive the fair value of an option, or to determine whether an option is overpriced or underpriced relative to its fair value. It is a useful tool for options traders and is an important concept in options pricing theory. Related articles What is Options Open Interest? What is Call Delta? What are Married Puts? What is a Barrier Spread? What are Options Liquidity Providers?