I have been trying to understand put call parity for a few weeks. The formula is still confusing.
I grasp the basic idea, but applying it to trades leads to mismatched numbers. I might be overlooking something.
Did anyone else face this when starting? How did you figure it out?
Made this mistake too. Double check your strike prices match exactly.
The tricky part is getting all your inputs from the same time frame and market conditions.
When I started with put call parity, I kept screwing up by using old data or mixing expiration dates. The formula works fine - you just need clean, synced data.
Try working backwards from market prices to check if your math makes sense. That’s how I caught my mistakes.
Skip the fancy formulas. Focus on what actually moves option prices when you’re trading. Most traders get stuck treating put call parity like magic instead of a basic relationship. Market makers use it for pricing, but you need to watch bid-ask spreads and volume more than theoretical values. Practice with liquid stocks where parity holds better. Once you see puts and calls move together during real market sessions, the formula clicks.
Double-check your interest rate calculation. Most mistakes happen when people use annual rates instead of adjusting for shorter expiration periods.
Been there! The formula seems straightforward until you try using it with real market data.
Risk-free rates and dividend yields threw me off completely. Blew three option trades because my theoretical values were way off.
Paper trading saved me - I’d calculate values and compare them to what the market was actually pricing. That’s when it finally clicked.