# Put/Call Parity

How far each call and put pair strays from put/call parity, strike by strike, to spot pricing dislocations.

Calls and puts on the same strike and expiry should price consistently with
each other: that relationship is **put/call parity**. The **Put/Call Parity**
widget plots how far each pair strays from it, in dollars, at every strike.
Dots near zero are fairly priced; dots far from zero are dislocations. Green
dots are pairs where the call is priced above what its put implies, red dots
the reverse. The header gives the average absolute deviation and how many pairs
were checked.

## Practical application

![Put/Call Parity widget, illustrative example: one cluster of upside calls priced rich](https://q-bitf.com/docs-img/put-call-parity.png "Illustrative example data, not a real session. NQ, all expiries: average deviation $0.285 across 1,090 pairs, with a cluster of +$2.40 to +$4.00 between 27,300 and 27,650.")

**Reading it.** Across **1,090** pairs the average deviation is **$0.285**.
Near spot the dots sit within a few cents of zero, and they spread out to
about ±$0.80 on the far strikes, where quotes are wider. One group does not
fit: about a dozen green dots between 27,300 and 27,650, sitting $2.40 to $4.00
above zero. Picking expiries one at a time in **Details** shows they all belong
to the expiry four days out.

**What it means.** In that one expiry, upside calls are priced well above
what the matching puts imply. Someone is paying up for those calls, or the
quotes there are stale or wide.

**How to use it.**

- **A tight band around spot:** the chain is priced consistently there;
  quotes can be trusted.
- **A cluster away from zero in one expiry:** treat prices there with care.
  If you trade those strikes, use limit orders, and compare with the same
  strikes in the next expiry.
- **Calls rich at upside strikes:** demand for upside in that expiry. Check
  [Unusual Activity](https://q-bitf.com/docs/widgets/unusual-activity) and
  [Open Interest](https://q-bitf.com/docs/widgets/open-interest) to see if new positions are
  behind it.
- **Wide scatter on far strikes only** is normal and mostly reflects wider
  quotes.