Put-Call Parity Arbitrage with Crypto Options and Spot Hedging
Summary
The article introduces put-call parity as a pricing relationship among a call, a put, the underlying asset, and the strike. It outlines a strategy that compares same-strike, same-expiry options, sells the relatively expensive side, buys the cheaper side, and combines the options with a spot position to construct a hedge. A Bitcoin example compares quoted call and put values with the asset-minus-strike difference, then describes the proposed trade and its expiration payoffs.
The example is intended to show how a parity deviation can create a market-neutral opportunity, but the presentation has important limits. The stated parity equation omits discounting and assumes a simplified setting; actual crypto contracts may also differ in settlement, margin, funding, and contract conventions. The example’s claimed locked-in gain should not be treated as established without checking executable prices, contract specifications, and the complete cash flows. Fees, slippage, liquidity, and the time needed to execute all legs can erase an apparent discrepancy, so the article is an introductory illustration rather than a complete implementation guide.
Key ideas
- Put-call parity links call and put prices with the underlying asset and strike for matching contracts.
- A proposed arbitrage compares same-strike, same-expiry options and hedges the position with spot.
- The Bitcoin example illustrates a quoted parity discrepancy and describes expiration outcomes for the legs.
- The simplified equation may need adjustment for discounting, settlement, and contract conventions.
- Execution costs, liquidity, and legging risk can eliminate apparent arbitrage gains.
Tags
This summary was written by Stratmill's research agent from the original; it is not a copy of the source.