Everlasting options give traders long-term options exposure without the effort, risk, or expense of rolling positions. We derive a simple no-arbitrage pricing model for everlasting options which extends to all funding-fee-based perpetual derivatives, including perpetual futures.

In comparison, for everlasting options, the payoff function is non-linear. Using the same example for a call option, if Bitcoin goes up, holders make money, and they don’t lose anything if it goes down. To maintain this less risky position, a fee is typically charged to the user on a per-second basis.

Currently, Deri offers two main products: perpetual futures and everlasting options. Perpetual futures and everlasting options are similar in that they both belong to the same funding fee-based perpetual derivative. These are kinds of derivatives in which the user must pay the funding fee to maintain the position, unlike regular futures, which come with expiration dates. Therefore, for as long as you pay the funding fee, your position is maintained. 

The difference between perpetual futures and everlasting options is the payoff function that is linked to the derivative. For perpetual futures, it is a linear payoff. For example, if Bitcoin (BTC) were to go up, the derivative holder would make money, and if it were to go down, the holder would lose money.

Everlasting options, a new type of derivative recently proposed to give traders long-term options exposure without the need of rolling positions. To help users get familiar with Deri’s everlasting options, we’ll take a deep dive into and showcase four Everlasting Options trading strategies.

Everlasting Call Options

Speculation without downside risk

Bob predicts that the price of BTC will rise significantly beyond the strike price of $20,000 and intends to profit from such a judgment.

Bob just needs to buy BTCUSD-20000-C Everlasting Options and keeps paying the funding fees (premium).

If the price of BTC went to $30,000, the mark price of the call options would go up by around $10,000， Bob would have an unrealized PnL of $10,000 for the call option he holds. He could sell the everlasting call options to realize a profit of $10,000.

Since there can be no limit as to how high the price of BTC can be, there is no limit to the maximum profit possible if Bob keeps paying the funding fees.

If Bob was wrong in his assessment and the BTC price went below $15,000, Bob would sell his positions and his total loss would be the funding fees paid.

Covered Call Strategy

Alice holds 1 BTC and would like to sell the BTC at $100,000.

Alice just needs to sell BTCUSD-100000-C Everlasting options and she would only need to keep sufficient collateral in her margin account. As long as her short position is maintained (i.e. her balance is above the maintenance margin requirement), she keeps collecting premium funding from the long positions.

If the price of BTC went to $100,000, Alice would have a PnL for the BTC spot she holds and the funding fee collected.

If the price of BTC didn’t go to $100,000, Allice’s overall PnL would be the funding fee collected.

Everlasting Put Options

Hedge against downside risk

Alice holds 1 BTC and would like to ensure that she would always be able to sell her position for at least $20,000 per BTC.

Alice just needs to long BTCUSD-20000-P Everlasting Options covering her spot portfolio and keeps paying the funding fees.

If the price of BTC went to $15,000, the mark price of the put option would immediately go up by around $5,000, Alice would have an unrealized PnL of $5,000 for the put option she holds. She could sell the everlasting put options to realize a profit of $5,000 to compensate for her loss due to the BTC price going to $15,000.

If the price of BTC went to $30,000, Alice would have a PnL for the BTC spot she holds.

Carry trade (trade to earn carry)

Bob predicts the price of BTC will not go below $20000 and would like to make profits from such a judgment.

Bob just needs to short BTC-20000-P Everlasting Options for his purpose, he would only need to keep sufficient collateral in his margin account. As long as his short position is maintained (i.e. his balance is above the maintenance margin requirement), he keeps collecting premium funding from the long position.

If the price of BTC went to $15,000, Bob would immediately suffer an unrealized PnL of around -$5,000, and his overall PnL would be funding fee collected + (-$5,000).

If the price of BTC went to $30,000, Bob’s overall PnL would be the funding fee collected.

Everlasting options implemented as a decentralized protocol are one of the pioneering DeFi primitives. That is, a new type of derivative that will give traders a never-before-seen long-term options exposure without the need for rolling positions. Head to Deri Protocol to check out now.