The relationship between the prices of the underlying stock,a call option,a put option,and a riskless asset is referred to as the ________ relationship.

Question

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Put-call parity is the relationship that must exist between the prices of a call option, a put option, the underlying stock, and a riskless asset. It states that if the prices of the options and the stock are not in equilibrium, then there is an arbitrage opportunity that investors can exploit to make risk-free profits. Therefore, put-call parity is a fundamental concept in options pricing and trading. The other choices (covered call, protective put, straddle, and strangle) are all specific option strategies that involve buying or selling options in different combinations with the underlying stock. While they may be related to put-call parity, they do not represent the same fundamental relationship between the prices of these securities.

The Relationship Between the Prices of the Underlying Stock,a Call