Parity

A term used to describe an option contracts total premium when that premium is the same amount as its intrinsic value. For example, when an options theoretical value is equal to its intrinsic value, it is said to be worth parity. When an option is trading for only its intrinsic value, it is said to be trading at parity. Parity may be measured against the stocks last sale, bid, or offer. The term is also used loosely to describe two currencies that are trading at one-for-one. For example, the euro has sometimes traded at parity with the US dollar when one euro equals one dollar.