Since crypto traders have already invented the perpetual futures contract, I'm surprised they haven't taken a stab at the perpetual option, which is pretty theoretically well-studied (and even has a closed-form price solution!)
Perpetual options are not that interesting to crypto traders because of the difficulty of dealing with assignment. "Everlasting options" are an attempt to improve on the idea by introducing a funding rate which keeps the derivative price close to intrinsic value -- you can ...
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... think of them as a very short maturity option (e.g. 8 hours) which automatically rolls into a new option at the same strike. But they are still annoying because you need to pick a strike, so to maintain constant-ish gamma you need to keep rolling up the strike chain.
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An attempt to fix /that/ is power perpetuals -- perpetual swaps which track the squared price of the underlying. They have constant gamma and a delta which varies with price. The delta can be dynamically hedged with a 2x short in perpetual swaps to get pure gamma exposure.
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Bonjour, the unroll you asked for:
@quantian1 Perpetual options are not that interesting to crypto… https://threadreaderapp.com/thread/1448714843922513930.html … Have a good day.
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