Put-Call Parity Arbitrage

European put and call prices are related through put-call parity, which specifies that the put price plus the price of the underlying equals the call price plus the present value of the strike price. The genius of option theory and structure is that two instruments, puts, and calls, are complementary with respect to both pricing and valuation. Therefore, by knowing the value of a put option you can quickly calculate the value of the complimentary call option (with the same strike price and expiration date) or vice-versa. There are many reasons that this is important knowledge for traders and investors. It can highlight profitable opportunities that present themselves when option premiums are out of whack.