Oh my! I had a child EXACTLY like this, only she was almost 8. Parents were in complete denial. Their child's behavior was everyone's fault BUT the parents or child.
I agree with everyone else. Immediate termination. It's tough, but boy will your life improve. You've tried talking to the parents, who do nothing. Perhaps this will be the wake up call they need. I would go with a short letter. They know what their kid is doing wrong, you've already told them. Mine went something along these lines:
Due to xxxx's ongoing behavioral issues, I will no longer be able to provide care for xxxx effective immediately. I wish xxxx all the very best in the future. If you have any questions or concerns, please do no hesitate to contact me.
Be prepared for the parents to possibly be rude towards you because they're angry. You've done nothing wrong and have tried your best. The parents need to step up and parent because all the awesome guidance in the world from a daycare provider will Not make an ounce of difference unless mom and dad reinforce it at home. Be strong and best if luck to you! It's tough but the right choice. Keep us updated!