Lesson Overview

Options Parity

Options parity happens when a stock is trading at its intrinsic value with no extrinsic value (or time value) in the option.

Parity will generally happen very close to expiration as theta erodes OTM option pricing or with very deep ITM options that are far from the current underlying price.

Remember that options are a wasting asset and at expiration all that's left is the intrinsic value. If an option is OTM at expiration it will have no intrinsic value and will expire worthless.

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