put-call parity states: C - P = S - K·e^(-rT)

Ever wondered how options and futures can be linked?

Imagine you're betting on the price of gold in a month. You can't just buy gold now; you need a way to bet on its price later.

Think of it like this: if you want to bet on gold's price rising, you buy a call option. If you bet on gold falling, you buy a put option. Put-call parity shows that holding a call and shorting a put is like owning a gold contract for the future.

Example

If you buy a call option for 50 and short a put option for 50, it's like you have a contract to buy gold at $50 next month.

Remember this

Put-call parity (C - P = S - K·e^(-rT)) ensures you can compare options and futures effectively.

Text adapted from Wikipedia, licensed under CC BY-SA 4.0.

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Educational content, not financial advice.

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