Hy
You say it is not very useful. It is useful.
It is a way to find out, what is to expensive at the moment and what is cheap.
As I was writing :
Look at the strike price and then look at the option prices. They must be all perfectly in line.
--------If they are not they will be overpriced or under priced.---------
If overpriced sell them and if under priced buy them.
It also gives you an idea where the market can move to.
I know, it is work to calculate and then to look at all this prices.
DanPickUp
I was not saying that put-call parity is a bad thing to look.
In 2008 ,Sebi has allowed to securities firms and their clients from directly connecting their computers to the stock exchanges for automating trading.
After that our firm's(GS) and also few more big firm's large number of orders placed are using the direct market access route. Of this, as much as 95% are orders that use algorithms.
I am a algo trader and We can access tick data .5-.75 second faster then normal terminal. Our code tries to find the arbitrage situations continuously, So if our code finds any arbitrage, could automatic eaten by the spread.
But from the last two year, Indian markets acting so efficient, that is there is hardly any arbitrage opportunities across indices or stock. Even our algo code does not make much money. That's why now we are focusing mainly on statistical arbitrage.
Put-call parity is the most basic arbitrage and you will not find this type opportunities in the market any more.Don't take otherwise. I hope you understand I was not trying to prove you wrong. I was simply explaining Indian markets efficiency.