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Market Intelligence › Basic Terminologies
Practical form of put call parity and why it comes in handy
Published by The Retail Trader · AUG 07, 2026 · Derivatives (F&O)
By combining options, a position can be created that behaves almost like futures. This is called synthetic position, and there is a simple relationship behind it.
Buying a call and selling a put of the same strike together gives a payoff almost like long futures. Like short futures on reverse.
This relationship is called put call parity. He tells that the values of call, put and underlying are tied together – all three are not free.
It is often used mechanically:
• Sometimes liquidity in options is better than futures.
• Margin calculation can be different in both the methods.
• It is useful in changing the direction without closing a position.
• Showing a door price well above parity is often a sign of liquidity, not free money.
Synthetic positions look like "hidden arbitrage" but they are just a different way of taking the same risk. Its payoff is like futures, which means its loss is also like futures.
This article is for educational purposes only. It is not a buy or sell recommendation, a claim of guaranteed returns, or advisory guidance. Exchanges, SEBI and RBI change rules, rates and procedures from time to time, so verify every figure with your broker or an official source.