I have been looking into put call parity, but I am not clear on its real importance in trading.
I get the formula, but how does it improve my trading decisions? Does it influence the prices on my platform?
It seems like just theory without practical use.
Put call parity reveals mispriced options on platforms.
• Identifies arbitrage opportunities
• Shows when premium is inflated
• Confirms fair value before entry
Platforms with pricing errors get exposed through this formula.
Most retail platforms don’t really follow put call parity perfectly anyway, so the theory gets messy in practice.
What matters more is spotting when the pricing feels completely off compared to what you’d expect. Sometimes the premiums are inflated during news events or low volume periods.
Better to focus on price action and basic support resistance levels for consistent results.
Lost $300 once because I ignored put call parity signals on a EUR/JPY trade that looked too good to be true.
The pricing was way off from what the formula suggested. That mismatch usually means something is wrong with the setup.
Now I check it before entering any binary option trade. Saved me from similar traps three times this month.
Understanding put call parity helps you gauge option pricing, which aids decision making.