Assessment of Arbitrage Opportunities in Options Markets Using Put-Call Futures Parity: Evidence from India

This paper aims at assessing the arbitrage opportunities in the Indian options market by using the best bid-ask quotes of European options premiums and futures prices in put-call parity theorem, covering the time period from July, 2015 to October, 2015. The opportunities are assessed for 61970 Put-Cheaper portfolios and 68225 Call-Cheaper portfolios. The underlying asset chosen for the current study is NSE Nifty index. The empirical results of the study show that in the absence of transaction costs, the put-call parity is violated in few cases and the frequency of arbitrage profits is higher in case of call-cheaper portfolios and the intensity of arbitrage profits is higher in case of put-cheaper portfolios. However after the incorporation of transaction costs, the arbitrage opportunities in the Indian options market are negligible and thus the results suggest that Indian options market are efficient to a great extent.