> For the complete documentation index, see [llms.txt](https://references.everstrike.io/llms.txt). Markdown versions of documentation pages are available by appending `.md` to page URLs; this page is available as [Markdown](https://references.everstrike.io/products/perpetual-options.md). # Perpetual Options Perpetual options are no-expiration options that are subject to [Funding](/trading/funding.md). Use them for continuous delta, gamma, vega, and theta exposure without choosing an expiration date. On Everstrike, perpetual options are priced, margined, and settled in [evUSD](/account/evusd.md). They are [cash-settled](https://www.investopedia.com/terms/c/cashsettlement.asp), so no physical delivery of the underlying asset takes place. The options use a dynamic strike price that is pinned to the 100-hour EMA of the underlier, plus or minus a fixed multiplier that varies by contract. This keeps the contracts relevant in perpetuity. ## Specification | Settlement | Cash | | ---------------------------- | -------------------------------- | | Expiration | Perpetual | | Pricing Currency | evUSD | | Margin Currency | evUSD | | Settlement Currency | evUSD | | Funding | Hourly | | Funding Interval | 1h | | Max. Funding Rate | 10% | | Funding Period | 10h | | Strike Price | EMA₁₀₀ (Underlier) \* Multiplier | | Strike Price Update Interval | 5 seconds | Notes: * *EMA₁₀₀* is the 100-hour [Exponential Moving Average](https://en.wikipedia.org/wiki/Moving_average). * *Underlier* is the [Everstrike Index Price](/trading/index-price.md) of the contract's underlying asset. * *Multiplier* is any of \[0.90,0.95,0.97,0.99,1,1.01,1.03,1.05,1.10]. Each options contract has a unique Multiplier. * *evUSD* refers to Everstrike's internal stablecoin, [Everstrike USD](/account/evusd.md). * *Strike Price Update Interval* is the interval at which the strike price is updated. * *Max Funding Rate* is the maximum [funding rate](/trading/funding.md) possible for the contract. * *Funding Interval* is the interval between each [funding](/trading/funding.md) exchange. The exchange takes place during the first five seconds of each hour. Trading is disabled during the first ten seconds. ## Strike prices Perpetual options on Everstrike have dynamic strike prices. This removes the need to delist old contracts and list new ones. The default strike price anchor is the 100-hour Exponential Moving Average, or EMA₁₀₀, of the contract's underlier. Contract strike prices cluster around this number using a fixed percentage offset per contract. This design has several benefits: * You can trade the same contract in 20 years from now that you are trading today. * There are no de-listings of contracts. You will never be forced to close out a position due to a contract being de-listed. * The options chain is completely stable. The same 18 contracts, forever. The tradeoff is that strike price movement affects P/L. [Drift](/trading/drift.md) helps you measure that effect. ### Example strike price selection * 1.1 \* EMA₁₀₀ (Underlier) * 1.05 \* EMA₁₀₀ (Underlier) * 1.03 \* EMA₁₀₀ (Underlier) * 1.01 \* EMA₁₀₀ (Underlier) * 1.00 \* EMA₁₀₀ (Underlier) * 0.99 \* EMA₁₀₀ (Underlier) * 0.97 \* EMA₁₀₀ (Underlier) * 0.95 \* EMA₁₀₀ (Underlier) * 0.90 \* EMA₁₀₀ (Underlier) Where EMA₁₀₀ is the 100-hour Exponential Moving Average, and Underlier is the option's underlying asset. ### EMA₁₀₀ EMA₁₀₀ refers to the 100-hour Exponential Moving Average. It is calculated using the following formula: `EMA₁₀₀ = EMA_100[Pₜ,Pₜ₋₁,…Pₜ₋₉₉],` where `EMA_100 = 100-length Exponential Moving Average` `Pₜ = Everstrike Index Price (right now)` `Pₜ₋₁ = Everstrike Index Price (1 hour ago)` `Pₜ₋₉₉ = Everstrike Index Price (99 hours ago)` ## Funding Funding-based derivatives are subject to [Funding](/trading/funding.md). Funding is an hourly exchange of money between longs and shorts. * Positive funding rate: longs pay shorts. * Negative funding rate: shorts pay longs. `Funding (Long) = -Funding Rate * Position Size (USD)` `Funding (Short) = Funding Rate * Position Size (USD)` Funding takes place during the first five seconds of each hour. During this time, Everstrike takes a snapshot of open positions and debits or credits each trader's margin balance according to the formulas above. ### Funding rate First calculate the premium: `Premium = ((Mark Price - Index Price) / Index Price)` Where: * `Mark Price` is the current trading price of the perpetual option. * `Index Price` is the spot reference price of the underlying asset. * `Premium` is the relative difference between the two. Next calculate the base funding rate: `Base Funding Rate = Max(dampener, Premium) + Min(dampener, Premium)` For perpetual options, `dampener = 1.00`. Finally, calculate the funding rate: `Funding Rate = Base Funding Rate * (Funding Interval/Funding Period)` ### Funding period The Funding Period on Everstrike is 10 hours. ### Funding interval The Funding Interval on Everstrike is 1 hour. This makes the gamma and vega profile of options on Everstrike similar to European-style 0DTE options. For more detail, see [Perpetual Options: The Greeks](https://blog.everstrike.io/perpetual-options-the-greeks/). ## Drift [Drift](/trading/drift.md) is unique to floating-strike options such as perpetual options, Asian options, and floating-strike lookback options. It measures how strike price movement affects intrinsic value. A Drift of 2% means strike price movement increases intrinsic value by 2% per hour. A Drift of -2% means the opposite. TLDR; Expected hourly percentage change in intrinsic value (from strike price movement only). Drift is often correlated with the funding rate. A negative Drift will often result in a negative funding rate, and vice versa. Everstrike displays Drift in the frontend UI alongside the funding rate. Unlike funding, Drift is informational only. No transfers ever take place because of Drift. Read more in [Drift](/trading/drift.md). ## Settlement Perpetual options are cash-settled. When you close a position, Everstrike realizes the position P/L and credits it to your cash balance. This happens automatically, usually within one second. ## Expiration Perpetual options do not expire. ## Equivalence with perpetual futures A perpetual call option with strike price zero is functionally equivalent to a perpetual futures contract. They share the same payoff function. [Funding](/trading/funding.md) for perpetual futures works in the same way as funding for perpetual options. ## Additional notes * Trading is disabled during the first ten seconds of each hour. * The hourly funding rate is capped at 10%. ## Example 1 A trader buys a perpetual BTC call option for 100 USD. The strike price is pinned to EMA₁₀₀(BTC). At entry, EMA₁₀₀(BTC) is 22,000 and BTC trades at 22,100. Twelve hours later, EMA₁₀₀(BTC) has risen to 22,100 and BTC trades at 22,500. The trader has paid $100 in funding. If the trader closes the option now, the net P/L is: `$22,500 - $22,100 - $100 - $100 = $200` This amount is credited to the trader's cash balance on close. ## Example 2 A trader buys a perpetual BTC put option for 10 USD. The strike price is pinned to EMA₁₀₀(BTC). At entry, EMA₁₀₀(BTC) is 22,000 and BTC trades at 22,100. Twelve hours later, EMA₁₀₀(BTC) has risen to 22,100 and BTC trades at 21,500. The trader has paid $300 in funding. If the trader closes the option now, the net P/L is: `$22,100 - $21,500 - $10 - $300 = $290` This amount is credited to the trader's cash balance on close.