Trading term
What is Put-call parity?
Put-call parity is the rule that links a put and a call with the same strike and expiry. Owning shares and selling a call pays off the same as selling a put and holding cash.
A call, a put, the shares and cash are tied together. If you own the shares and sell a call at a strike, your result at expiry is the same as if you'd sold a put at that strike and held the cash. Both make a capped amount above the strike and lose with the shares below it.
If the prices ever drifted apart, traders could buy one side and sell the other for a riskless profit. So the market keeps them in line.
For example
A covered call on the S&P 500 at a strike of 5,000 and a cash-secured put at 5,000 with the same expiry end with the same gain or loss, give or take interest and dividends.
Go hands-on in Premium
That's Put-call parity in theory — it clicks when you read it on a live chart. Practise it hands-on in the TradeWize Premium Options track.
Explore Premium →Why it matters to you
It shows that some strategies are the same trade in different clothes. The wheel switches between selling puts and covered calls, but it's short a put the whole time.
⚠ Thinking a switch is a change of bet
Going from selling puts to selling covered calls feels like a new position. At the same strike, the payoff is the same.