Option Trading: Synthetic Securities and Put-Call Parity
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Option Trading: Synthetic Securities and Put-Call Parity

Intuition Publishing
Updated Sep 24, 2020

Option trading strategies can be constructed to replicate outright positions in the underlying asset, but the put-call parity relationship governs the pricing of the various options to remove the possibility of arbitrage. We look at these synthetic long and short positions, and then examine the put-call parity relationship in action.