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Put-Call Parity Formula

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Call Option Price is the amount paid by the option buyer to acquire the right, but not the obligation, to purchase the underlying asset at a predetermined strike price. Check FAQs

c t = S t + p t - (\frac{X s}{{(1 + (\frac{R f}{100}))}^{\frac{n m}{12}}})

c_t - Call Option Price?S_t - Spot Price of Underlying Asset?p_t - Put Option Price?X_s - Strike Price?R_f - Risk-Free Rate of Return?n_m - No. of Months?

Put-Call Parity Example

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Here is how the Put-Call Parity equation looks like with Values.

Here is how the Put-Call Parity equation looks like with Units.

Here is how the Put-Call Parity equation looks like.

7.293 = 53 + 4 - (\frac{50.1}{{(1 + (\frac{3.2}{100}))}^{\frac{3}{12}}})

7.293 = 53 + 4 - (\frac{50.1}{{(1 + (\frac{3.2}{100}))}^{\frac{3}{12}}})

7.293 = 53 + 4 - (\frac{50.1}{{(1 + (\frac{3.2}{100}))}^{\frac{3}{12}}})

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Put-Call Parity Solution

Follow our step by step solution on how to calculate Put-Call Parity?

FIRST Step Consider the formula

c t = S t + p t - (\frac{X s}{{(1 + (\frac{R f}{100}))}^{\frac{n m}{12}}})

Next Step Substitute values of Variables

∴

c t = 53 + 4 - (\frac{50.1}{{(1 + (\frac{3.2}{100}))}^{\frac{3}{12}}})

Next Step Prepare to Evaluate

∴

c t = 53 + 4 - (\frac{50.1}{{(1 + (\frac{3.2}{100}))}^{\frac{3}{12}}})

Next Step Evaluate

∴

c t = 7.29297151436622

LAST Step Rounding Answer

∴

c t = 7.293

Put-Call Parity Formula Elements

Variables

Call Option Price

Call Option Price is the amount paid by the option buyer to acquire the right, but not the obligation, to purchase the underlying asset at a predetermined strike price.

Symbol: c_t

Measurement: NAUnit: Unitless

Note: Value should be greater than 0.

Formulas to find Call Option Price

Spot Price of Underlying Asset

Spot Price of Underlying Asset refers to its current market price for immediate delivery or settlement.

Symbol: S_t

Measurement: NAUnit: Unitless

Note: Value should be greater than 0.

Formulas to find Spot Price of Underlying Asset

Put Option Price

Put Option Price represents the cost paid by the option buyer to obtain the right, but not the obligation, to sell the underlying asset at a specified strike price.

Symbol: p_t

Measurement: NAUnit: Unitless

Note: Value should be greater than 0.

Formulas to find Put Option Price

Strike Price

Strike Price is the pre-determined price at which the buyer and seller of an option agree on a contract or exercise a valid and unexpired option.

Symbol: X_s

Measurement: NAUnit: Unitless

Note: Value should be greater than 0.

Formulas to find Strike Price

Risk-Free Rate of Return

Risk-Free Rate of Return is the interest rate an investor can expect to earn on an investment that carries zero risk.

Symbol: R_f

Measurement: NAUnit: Unitless

Note: Value should be greater than 0.

Formulas to find Risk-Free Rate of Return

No. of Months

No. of Months is the period in which the call/put option is valid before expiration.

Symbol: n_m

Measurement: NAUnit: Unitless

Note: Value should be between 0 to 12.

Formulas to find No. of Months

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How to Evaluate Put-Call Parity?

Put-Call Parity evaluator uses Call Option Price = Spot Price of Underlying Asset+Put Option Price-((Strike Price)/((1+(Risk-Free Rate of Return/100))^(No. of Months/12))) to evaluate the Call Option Price, The Put-Call Parity is an important concept in options pricing which shows how the prices of puts, calls, and the underlying asset must be consistent with one another. Call Option Price is denoted by c_t symbol.

How to evaluate Put-Call Parity using this online evaluator? To use this online evaluator for Put-Call Parity, enter Spot Price of Underlying Asset (S_t), Put Option Price (p_t), Strike Price (X_s), Risk-Free Rate of Return (R_f) & No. of Months (n_m) and hit the calculate button.

FAQs on Put-Call Parity

What is the formula to find Put-Call Parity?

The formula of Put-Call Parity is expressed as Call Option Price = Spot Price of Underlying Asset+Put Option Price-((Strike Price)/((1+(Risk-Free Rate of Return/100))^(No. of Months/12))). Here is an example- 7.292972 = 53+4-((50.1)/((1+(3.2/100))^(3/12))).

How to calculate Put-Call Parity?

With Spot Price of Underlying Asset (S_t), Put Option Price (p_t), Strike Price (X_s), Risk-Free Rate of Return (R_f) & No. of Months (n_m) we can find Put-Call Parity using the formula - Call Option Price = Spot Price of Underlying Asset+Put Option Price-((Strike Price)/((1+(Risk-Free Rate of Return/100))^(No. of Months/12))).

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Put-Call Parity Formula

Put-Call Parity Example

Put-Call Parity Solution

Put-Call Parity Formula Elements

Other formulas in International Finance category

How to Evaluate Put-Call Parity?

FAQs on Put-Call Parity

Variable Name