Perpetual Options

The perpetual option is a more powerful version of the perpetual future.

The perpetual option is a more powerful version of the perpetual future.

It provides optionality and convexity - properties that the perpetual future cannot provide.

The perpetual call option with strike price zero is functionally equivalent to the perpetual future.

For a high-level technical overview of the perpetual option, refer to our blog post.

Perpetual Options on Everstrike

Everstrike offers linear floating strike perpetual options.

The options are cash-settled, and have no expiration date. The settlement currency is always in USD.

The options are priced and margined in USD.

The options are subject to funding. At the start of every hour, a Funding Payment is exchanged between longs and shorts. The Funding Payment is determined by the Funding Rate (Funding Payment = Funding Rate * Position Size). If the Funding Rate is positive, longs pay shorts. If the Funding Rate is negative, shorts pay longs. The strike prices of the options are pinned to the 100-hour EMA of the underlier, plus or minus a multiplier. A perpetual BTC call option is the right to buy 1 BTC at a specific price (the Strike Price), and a put option is the right to sell 1 BTC at a specific price (the Strike Price). Since the strike prices on Everstrike are floating, this may or may not be the Strike Price of the option when you bought or sold it.

Example 1

A trader buys a floating strike perpetual BTC call option for a price of 1,000 USD. The Strike Price of the option is pinned to the 100-hour EMA of BTC. At the time of purchase, the 100-hour EMA of BTC is 22,000, and the price of BTC is 23,000. Now, he has the right to buy 1 BTC, at any time in the future, at a price that equals the 100-hour EMA of BTC. One week later, the 100-hour EMA of BTC has risen to 23,000, and the price of BTC has risen to 25,000. If the trader decides to sell his option now, he will profit the difference between the price of BTC and the 100-hour EMA of BTC, minus his initial purchase price ($25,000 - $23,000 - $1,000 = $1,000). This amount will be automatically credited to his balance, should he decide to sell it.

Example 2

A trader buys a floating strike perpetual BTC call option for a price of 500 USD. The Strike Price of the option is pinned to the 100-hour EMA of BTC. At the time of purchase, the 100-hour EMA of BTC is 20,000, and the price of BTC is 20,500. One week later, the 100-hour EMA of BTC has dropped to 18,000, and the price of BTC has dropped to 19,000. If the trader decides to sell his option now, he will profit the difference between the price of BTC, and the 100-hour EMA of BTC, minus his initial purchase price ($19,000 - $18,000 - $500 = $500).

Example 3

A trader buys a floating strike perpetual BTC call option for a price of 2,000 USD. The Strike Price of the option is pinned to the 100-hour EMA of BTC (plus 10 percent). At the time of purchase, the 100-hour EMA of BTC (plus 10 percent) is 22,000, and the price of BTC is 24,000. One week later, the 100-hour EMA of BTC (plus 10 percent) has risen to 24,000, and the price of BTC has risen to 25,000. If the trader decides to sell his option now, he will profit the difference between the price of BTC, and the 100-hour EMA of BTC (plus 10 percent), minus his initial purchase price ($25,000 - $24,000 - $2,000 = -$1,000).

Example 4

A trader buys a floating strike perpetual BTC put option for a price of 100 USD. The Strike Price of the option is pinned to the 100-hour EMA of BTC (minus 10 percent). At the time of purchase, the 100-hour EMA of BTC (minus 10 percent) is 20,000, and the price of BTC is 22,000. One week later, the 100-hour EMA of BTC (minus 10 percent) has dropped to 19,000, and the price of BTC has dropped to 18,000. If the trader decides to sell his option now, he will profit the difference between the 100-hour EMA of BTC (minus 10 percent), and the price of BTC, minus his initial purchase price ($19,000 - $18,000 - $100 = $900).