The put-call parity theorem suggests that:

Question

Quizplus · Accepted Answer

According to the put-call parity theorem, the put price equals the call price, less the share price, plus the present value of the exercise price. This is because buying a call option and simultaneously selling a put option (both with the same exercise price and expiration date) is equivalent to buying the underlying asset. Therefore, the prices of these options must be equivalent. Option A is incorrect because the put-call parity theorem is a tool for preventing arbitrage opportunities. Option B is close, but the share price should be subtracted, not added, to the call and put prices. Option C is not a direct implication of the put-call parity theorem.

The Put-Call Parity Theorem Suggests That