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Assume Call prices are right in NSE Option Chain.

Verify if
Put Call parity holds
Harshit Garg 22B
Anirudh Dutta 4C
Francesca Gallarotti 57C
The putcall parity defines a relationship between the price of a European call
option and European put option, both with the identical strike price and expiry,
namely that a portfolio of a long call option and a short put option is equivalent to
(and hence has the same value as) a single forward contract at this strike price and
expiry. This is because if the price at expiry is above the strike price, the call will be
exercised, while if it is below, the put will be exercised, and thus in either case one
unit of the asset will be purchased for the strike price, exactly as in a forward
contract. Mathematically, the call put parity is written as
rt

C+ X e =P+S
Where C is the call price, X is the strike price, P is the put price and S is the price of
the underlying asset.
In order to study the validation of the call put parity in Nifty, we take the Nifty
option chain for the next three expiry dates (September, October, and December).
We assume the call prices to be correct and then use the call put parity equation to
predict the put price.

DATA SET
August 27th Expiry. Value of underlying asset is 7841.50
Call
Ask price
c
1719.00
1673.00
1623.00
1388.95
1340.95
1477.00
1238.90
1381.00
1138.95
1281.00
1052.60
1185.00
938.95
1085.00
839.75
949.00

Strike Price
X
6300.00
6350.00
6400.00
6450.00
6500.00
6550.00
6600.00
6650.00
6700.00
6750.00
6800.00
6850.00
6900.00
6950.00
7000.00
7050.00

Put
Ask price
p
2.95
3.00
0.70
0.50
0.60
0.90
0.90
0.90
3.00

Theoretical p
175.87
179.86
179.85
-4.22
-2.23
183.81
-4.31
187.78
-4.29
187.75
9.34
191.72
-4.34
191.70
-3.57
155.67

Differrence in
Actual and
Theoretical p
N.A.
N.A.
-176.90
7.22
2.93
N.A.
4.81
N.A.
4.89
N.A.
-8.44
N.A.
5.24
N.A.
4.47
-152.67

Action to be taken
N.A.
N.A.
Buy the put
Sell the put
Sell the put
N.A.
Sell the put
N.A.
Sell the put
N.A.
Buy the put
N.A.
Sell the put
N.A.
Sell the put
Buy the put

740.00
892.50
641.00
789.50
539.10
598.95
450.00
498.95
341.20
398.95
245.90
298.90
154.90
114.15
79.90

7100.00
7150.00
7200.00
7250.00
7300.00
7350.00
7400.00
7450.00
7500.00
7550.00
7600.00
7650.00
7700.00
7750.00
7800.00

1.20
1.35
1.95
4.95
2.65
4.90
4.85
8.85
9.65
14.25
20.45
30.50
44.50

-3.34
199.14
-2.37
196.11
-4.30
105.54
6.57
105.51
-2.25
105.48
2.42
105.40
11.39
20.63
36.36

4.54
N.A.
3.72
N.A.
6.25
-100.59
-3.92
-100.61
7.10
-96.63
7.23
-91.15
9.06
9.87
8.14

Sell the put


N.A.
Sell the put
N.A.
Sell the put
Buy the put
Buy the put
Buy the put
Sell the put
Buy the put
Sell the put
Buy the put
Sell the put
Sell the put
Sell the put

October 29th Expiry. Value of underlying asset : 7891.65

Call
Ask
price
c

Put
Strike
Price
X

Ask
price
p

2296
2246.
55
2197.
25
2147.
85
2098.
45
2049.
2
1999.
95
1950.
75
1901.
65
1852.
7
1803.
9
1755.
25

6300 -

1602
1658.
5

6900 -

6350 6400 6450 6500 6550 6600 6650 6700 6750 6800 6850 -

6950 -

Theoretic
al p
595.4970
78
595.1780
07
595.0089
36
594.7398
65
594.4707
94
594.3517
24
594.2326
53
594.1635
82
594.1945
11
594.3754
4
594.7063
7
595.1872
99
491.0682
28
596.6991
57

Differrence in
Actual and
Theoretical price

Action to be
taken

N.A.

N.A.

N.A.

N.A.

N.A.

N.A.

N.A.

N.A.

N.A.

N.A.

N.A.

N.A.

N.A.

N.A.

N.A.

N.A.

N.A.

N.A.

N.A.

N.A.

N.A.

N.A.

N.A.

N.A.

N.A.

N.A.

N.A.

N.A.

1031.
5
1562.
8
1049.
95
1468.
5
949.9
5
1376.
05
799.9
5
1285.
15
799.9
5
1196.
15
588.1
5

7000

57.25

7050 7100

71.5

7150 7200

79.55

7250 7300
7350
7400

94.1
328.6
5

7500

110.8
379.7
5
130.4
5

1110
599.9
5
1026.
7
469.8
5

7550

435.6

7600

153.6

7650

495.8

7700

179

946.5
357.9
5

7750

560.2

7800

869.5
292.3
5

7850

209.2
628.5
5

7900

240.6

796

7950

700.7

231.9

8000

726.3
185.8

8050
8100

280
776.3
5
324.5

7450

18.83008
64
38.41991363 Sell the put
599.2610
16 N.A.
N.A.
135.5419
45
-64.04194475 Buy the put
603.2228
74 N.A.
N.A.
133.8038
03
-54.25380313 Buy the put
609.0347
32 N.A.
N.A.
82.06566
15
12.0343385 Sell the put
616.3965
91
-287.7465907 Buy the put
180.3275
2
-69.52751988 Buy the put
625.6584
49
-245.9084491 Buy the put
66.78937
83
63.66062174 Sell the put
637.7703
07
-202.1703074 Buy the put
176.8512
37
-23.25123663 Buy the put
652.7321
66
-156.9321658 Buy the put
145.0130
95
33.98690499 Sell the put
670.7940
24
-110.5940242 Buy the put
131.3749
53
77.82504661 Sell the put
692.0558
83
-63.50588257 Buy the put
164.0368
12
76.56318824 Sell the put
716.8177
41
-16.11774095 Buy the put
201.8486
7
78.15132986 Sell the put
745.3795
99
30.97040067 Sell the put
254.0105
70.53947148 Sell the put

660.3
5

8150

146

8200

198

8250

111
539.9
5

8300

84.3

8400

485.7

8450

65.7

8500

8550
50.25

38.8
-

8600
8650
8700
8750

31.2
-

8800
8850

24.4

8900
8950

20.5

9000

9050
16.8

9100
9150

13.95
-

8350

9200
9250

5
29
855.2 777.6914
5
58
312.4723
381.6
87
413.6033
937.2
16
375.7342
455.7
45
1021. 853.8151
85
74
524.2 447.2961
5
04
1108. 897.8270
9
33
526.9579
597
62
1197.
95 N.A.
932.4 609.7698
5
2
1289 N.A.
696.5816
887.5
79
1382.
15 N.A.
1317. 787.2435
6
37
1475.
95 N.A.
999.9 878.7053
5
96
1571 N.A.
1098. 973.0672
1
54
1667.
15 N.A.
1249. 1067.629
95
11
1763.
9 N.A.
1349. 1163.040
95
97
1861.
3 N.A.

77.5585423 Sell the put


69.12761311 Sell the put
523.5966839 Sell the put
79.96575473 Sell the put
168.0348255 Sell the put
76.95389635 Sell the put
211.0729672 Sell the put
70.04203798 Sell the put
N.A.
N.A.

N.A.
322.6801796 Sell the put
N.A.
190.9183212 Sell the put

N.A.

N.A.
530.3564628 Sell the put

N.A.

N.A.

121.2446045 Sell the put


N.A.
N.A.
125.0327461 Sell the put
N.A.

N.A.
182.3208877 Sell the put

N.A.

N.A.
186.9090293 Sell the put

N.A.

N.A.

12.5
-

9300
9350

12
-

9400
9450

9.4
-

9500
9550

25
-

9600
9650

30

9700

9750

9800

9850

9900

9950
10

10000
10050

1449.
95
1959.
15
1549.
95
2057.
4

1259.852
83

190.097171 Sell the put

N.A.
N.A.
N.A.
1357.614
69
192.3353126 Sell the put

N.A.
N.A.
1453.276
1563
55
109.7234542
2155.
85 N.A.
N.A.
2205. 1567.138
2
4
638.0615958
2254.
5 N.A.
N.A.
2303. 1670.400
85
26
633.4497375
2353.
2 N.A.
N.A.
2402.
55 N.A.
N.A.
2451.
95 N.A.
N.A.
2501.
35 N.A.
N.A.
2550.
7 N.A.
N.A.
2600. 1945.185
15
84
654.9641623
2649.
5 N.A.
N.A.

N.A.
Sell the put
N.A.
Sell the put
N.A.
Sell the put
N.A.
N.A.
N.A.
N.A.
N.A.
Sell the put
N.A.

The rate of interest in the above calculation is taken as 10%. For some of the calls,
the data for put was not mentioned
ANALYSIS
For none of the calls and puts, the call put parity was true. There were deviations,
ranging from as low as Rs. 2 to as high as Rs. 600. Due to the mismatch, there is a
high opportunity of arbitrage in the market. We have tried to attribute this
mismatch to some factors, which are: the extent to which options are in the money
or out of the money; whether violation is more in case of in the money options or
out of the money options; time to maturity of the option; and number of contracts
traded.

Some other reasons why call put parity does not hold true is the inherent volatility
in the market which makes determination of a put price based on an accurate spot
and strike price difficult. Also, one of the assumption in the above calculation has
been the constant interest rate over the span of three months. This assumption
does not hold true in practice. Thirdly, the equation does not consider the dividends
paid during the time period under consideration. Lastly, the prices of call and put
are not static either. Depending on whether the market is bullish or bearish, the
value of call and put can change.