Put-call parity is an important concept in options trading that defines the relationship between the price of European put and call options of the same class. Put-call parity states that the simultaneous purchase and sale of a European call and put option of the same class (same underlying asset, strike price, and expiration date) is equivalent to buying the underlying asset right now. Put-call parity is expressed by the following equation: C0 + Xe-rt = P0 + S0

Where:

C0 is the current price of the call option
X is the strike price of the option
r is the risk-free rate of interest
t is the time until expiration
P0 is the current price of the put option
S0 is the current price of the underlying asset

Put-call parity is important because it allows traders to determine the approximate value of a put or call relative to its other components. If the put-call parity is violated, then arbitrage opportunities arise. This is because when one side of the put-call parity equation is greater than the other, this represents an arbitrage opportunity.

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