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Using put-call parity to locate trade opportunities
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AT-October 2006-6
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A synthetic put or call can expose you to larger losses than the price paid for a regular option, but the synthetics lower cost and flexibility can more than compensate for the additional risk.
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Detailed Description
Put–call parity apparently seems complicated to many traders. At least, there is little evidence of much awareness of this option property. The pity of this is that an understanding of put–call parity can help you find trading opportunities you might not otherwise be aware of. Also, it can help you gain a measure of flexibility in managing your option positions.
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