An option trades at parity when its price equals its intrinsic value — meaning it has no time value left. It’s typical of deep in-the-money options near expiration.

What it means

Normally an option’s price = intrinsic + extrinsic (time) value. At parity, the extrinsic value is ~zero, so the option is worth only its intrinsic value — the amount you’d capture by exercising. It moves point-for-point with the underlying (delta ~1.0), behaving like the stock itself.

When it happens

Parity occurs for deep ITM options near expiration — there’s little time left and the option is so far in the money that its value is essentially all intrinsic. It’s also relevant to early exercise decisions (a deep-ITM option at parity has no time value to give up, so exercising costs nothing extra) and put-call parity arbitrage.

At parity, an option is pure reality — worth only what it’d fetch if exercised now, with all the “maybe” priced out.

The takeaway

Parity = price equals intrinsic value (no time value), typical of deep-ITM options near expiration. It’s a niche but useful concept for understanding option pricing and exercise decisions. Not something a 0DTE scalper trades on directly, but part of full options literacy.