Does an option trading below parity always indicate an arbitrage opportunity?
If an option is trading for less than parity, is it always a mispricing, waiting to be arbitraged, or are there other factors that can lead to this?
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Probably but not necessarily.
Your question could also be posed regarding cash & carry for commodities in contango: If I can take delivery on the gold now, short the gold next year and make delivery then, paying the storage fees, is this an arbitrage opportunity?
It is in the sense that you know your delivery and the money you will make, but it's not in the sense that until delivery (or execution in the options case) you are still on the hook for the margins due from price fluctuations. Additionally you need to consider what ROI you will make from the trade. Even though it's "guaranteed" it may be less than what you can earn from other "zero risk" opportunities.
In the equity world, if a stock trades at 110 and is going to pay a dividend of 10 in a few days, an option expiring after the ex date would take the dividend into account and would trade as if the stock were trading at 100. (Negative) interest rates may also lead to a similar effect.
In the commodity world the cost of carry needs to be taken into account.
Defining parity as "parity is the amount by which an option is in the money", I'd say there may be an arbitrage opportunity. If there's a strike on a stock valued at that I can buy for less than , there's an opportunity.
Keep in mind, options often show high spreads, my example above might show a bid/ask of .75/.25, in which case the last trade of .50 should be ignored in favor of the actual ask price you'd pay.
Mispricing can exist, but in this day and age, is far less likely.
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