PUT-CALL PARITY & ARBITRAGE OPPORTUNITIES – A CASE STUDY OF NSE STOCK OPTION

Abstract

price of one option can’t move very far without the price of the corresponding options changing also. So if the parity is violated, an opportunity for arbitrage exists. Arbitrage strategies are not a useful source of profits for the average trader, but knowing how synthetic relationships work can help in understanding options better while providing investors with strategies to add to their options-trading toolbox. This study is based on arbitrage or risk less profit on stock options trading on NSE (National Stock Exchange). The most flexible derivatives are options. An option is a legal agreement between two parties that gives one party, the option holder, the right but not the obligation to buy or sell an asset. It is this element of choice that differentiates options from forwards and futures.