What Is Perpetual Options?
Perpetual options (also called everlasting options) are options contracts that never expire. They combine the expiration-free nature of perpetual futures with the asymmetric payoff profile of traditional options. Like perpetual futures use funding rates to anchor to spot, perpetual options use a funding mechanism to maintain their theoretical value relative to a Black-Scholes-equivalent price.
How Perpetual Options Works
The funding mechanism for perpetual options works similarly to perpetual futures: holders of perp options pay a periodic funding rate that reflects the difference between the mark price and the theoretical intrinsic value. This funding rate replaces time decay (theta), meaning the cost of holding the option is spread over ongoing payments rather than a declining premium approaching expiration.
Why It Matters for Traders
Perpetual options solve a major problem for crypto traders: the need to constantly roll expiring options positions. Instead of buying monthly options and rolling them before expiry (incurring spread costs each time), a perpetual option provides continuous exposure. This makes hedging simpler and more capital-efficient. As the perpetual options market matures, it could become the preferred instrument for portfolio protection and volatility trading in crypto.
How It Works on CEX Perps
On centralized perpetual futures venues, perpetual options shows up in the position panel, the funding timer, or the liquidation engine rather than as a separate product. Traders usually check it next to mark price, margin mode, and open interest so they do not size a trade from last price alone.
Example numbers only (not a live quote): if you hold a $10,000 notional long with 5x leverage, your initial margin is about $2,000. A move against you of roughly 20% of that notional can push the position near maintenance margin depending on the venue formula. Always read the venue's own liquidation rule before you size.
Formula and Worked Example
Use this only as a labeled example. It is not a live market print.
- Notional = coin size × mark price.
- Initial margin ≈ notional ÷ leverage.
- Distance to liquidation depends on maintenance margin, fees, and whether you use cross or isolated margin.
Example: 0.1 BTC long, mark $60,000, leverage 10x → notional $6,000, initial margin about $600. If maintenance margin is near 0.5% of notional, a modest adverse move can close the trade even when your thesis is still intact.
Common Mistakes
- Treating a single print of perpetual options as a trade signal without checking funding, open interest, and your liquidation price.
- Mixing venue conventions (coin-margined vs USDT-margined, cross vs isolated) and reading the wrong mark.
- Copying example numbers from a glossary into live size without checking the current book depth and fee schedule.
- Ignoring related terms that change the meaning of the print on a given day.
