Perpetual Options: What They Are and How to Value Them

Perpetual options are options that never expire, and that one change creates a hard problem: how do you put a fair value on a contract with no end date? For attorneys, corporations, and regulators who deal with financial disputes, that question is turning practical. These instruments are moving from academic papers into live markets, and when money is contested, someone has to measure what one of them is worth.

There is a wrinkle worth clearing up at the start. The term perpetual options points to two different things. One is an old idea from financial economics: an option with no fixed expiration. The other is a newer crypto instrument, sometimes called an everlasting option, that keeps a position open through a funding payment rather than an expiry date. This article covers both, explains how they are valued, and looks at where the value becomes the center of a dispute.

Whether one of these contracts is regulated as a future, a swap, or something else is a legal question, and courts and regulators decide it. The economic question is separate, and it is the one this article answers: what drives the value of a perpetual option, and how do you measure it?

What Is a Perpetual Option?

A perpetual option is an option with no expiration date. The holder keeps the right to buy or sell an asset at a fixed strike price for as long as the position stays open, so the right never lapses on a set date.

To step back one level, an option is the right, but not the obligation, to buy or sell an asset at a set price called the strike. A call gives the right to buy. A put gives the right to sell. Almost every option you meet has an expiration date, and after that date, it is gone. A perpetual option is the exception.

Because there is no expiry, there is no need to close one position and open another as contracts run out, a routine that traders call rolling. Rolling costs money and takes attention, so a contract that never needs rolling has real appeal.

The Two Things People Call Perpetual Options

The first meaning comes from classical finance. A perpetual option here is an option with no maturity date, closely related to an American option, which can be exercised at any time. These have been studied for decades, yet they are rarely traded on exchanges. When they change hands at all, it happens over the counter, one party to another. Their main use has been as a teaching example and a research subject.

The second meaning comes from crypto. In 2021, researchers at the firm Paradigm introduced the everlasting option. It gives a trader long-lasting options exposure without rolling, and it borrows its machinery from a close cousin, the perpetual future. In place of an expiry date, the contract uses a funding payment that passes between the two sides at regular intervals. That payment keeps the price of the contract tied to what the option would be worth if it settled right now.

So the same phrase covers a textbook instrument that almost nobody trades and a crypto instrument that trades in real venues today. When a document, a filing, or a claim refers to perpetual options, the first useful step is to work out which one is meant, because the two are priced in different ways.

Perpetual Options vs Perpetual Futures

This is the confusion that trips up most readers, partly because much of the material online about perpetual options is actually about perpetual futures. Here is the difference at a glance.

A perpetual future lets someone bet on the price of an asset without owning it, with no expiry date, kept in line with the spot price by a funding payment between the long and short sides. It has a straight payoff. As the asset moves, the position gains or loses one for one. Perpetual futures, first launched by BitMEX in 2016, became one of the most traded products in all of crypto.

A perpetual option works differently in one key way. It carries a strike price and a lopsided payoff. A call pays only once the asset rises above the strike. A put pays only once the asset falls below it. That optionality is what makes it harder to value than a future.

There is a clean link between the two. A perpetual call with a strike price of zero behaves like a perpetual future, because it always pays the full price of the asset. Seen that way, the perpetual future is the simplest member of the family, and the everlasting option is the general case. That is why one funding-payment model can price both.

Why Perpetual Options Are Hard to Value

For ordinary options, the market has a trusted tool, the Black-Scholes model. It has one requirement that a perpetual option cannot meet. It needs an expiration date. Take the date away, and the standard formula does not apply. That is the core of the valuation problem.

The Paradigm work found a way through it. An everlasting option is equal in value to a basket of ordinary options that expire on different dates, held in shrinking amounts. With funding paid once a day, the basket holds half of an option expiring today, a quarter expiring tomorrow, an eighth expiring the day after, and so on. Add up the value of the basket, and you have the value of the perpetual option. The funding payment is the running cost of holding that basket over time.

A few inputs drive the number. A higher funding rate makes the contract more expensive to hold, which pulls its value down for the holder. Higher volatility in the underlying asset pushes the value up, because a wider range of outcomes makes the option more useful. In crypto, two more inputs matter. The contract depends on a price feed, called an oracle, to know the current price of the asset, and a wrong or slow oracle distorts the value. Liquidity matters as well, because a thin market makes the price harder to pin down and harder to trade out of.

The classical version has its own hard part. With no expiry, the holder has to decide when to exercise, and the right choice depends on the price reaching a level where acting beats waiting. Working out that level and the value that follows from it is a separate calculation with its own methods.

Here is a short illustration. Suppose a trader holds an everlasting put on ether with a strike of 3,000 dollars, and ether trades at 2,900. The put is worth at least 100 dollars in immediate payoff, and the holder pays a small funding amount each day to keep it open. If the ether swings hard from week to week, the holder pays more to hold the put because the protection it offers is worth more. The value at any moment reflects the balance between the current payoff, the expected funding cost, and how far the price of ether is likely to move. No single formula returns one clean answer, so an analyst uses a mix of models, simulations, and market data to reach a defensible figure.

A Real-World Example: Future or Swap?

Perpetual contracts moved to the center of a live regulatory dispute in 2026, highlighting why the way these instruments are defined carries real financial weight.

On May 29, 2026, the Commodity Futures Trading Commission approved a bitcoin perpetual futures contract from the platform Kalshi as a listed future, and it issued a policy statement inviting other exchanges to bring similar products forward. During a beta period, the contract traded more than 3 billion dollars in notional value. On June 18, 2026, CME Group, the largest derivatives exchange operator in the world, filed a complaint in federal court in Washington against the CFTC. CME argued that these perpetual contracts should be regulated as swaps under the Commodity Exchange Act rather than as futures.

Whether a perpetual contract is a future or a swap is a legal question, and the court and the regulator will settle it. The economic question revolves around what the label changes. A swap and a future are margined differently, follow different rules, and are taxed differently, and the answer also decides which party may list the product and how much capital and reporting the listing requires. For anyone valuing one of these contracts, or the business that trades them, the classification feeds directly into the cost of holding a position and the risk attached to it.

This case concerns perpetual futures, the simpler cousin. The same questions reach perpetual options, which run on the same funding-payment machinery and add the further complication of a strike price and a lopsided payoff.

Where Perpetual Options Trade Today

The everlasting option has moved from paper into practice, mostly in decentralized finance, where protocols such as Panoptic let people trade perpetual-style options without a fixed expiry. Volumes are far smaller than the enormous market for perpetual futures, but the products are real and running.

The idea is reaching beyond crypto as well. Some venues now offer perpetual-style exposure to individual stocks, letting a trader hold a position tied to a share such as Tesla or Nvidia without an expiry date and without owning the stock. The concept has older roots, too. In the 1990s, the economist Robert Shiller proposed perpetual claims on hard-to-trade assets such as home prices, as a way to build markets where none existed. The through line is simple. An instrument with no end date is useful in many markets, and the tools to value one are starting to travel with it.

The Risks That Shape Value

The value of a perpetual option is only as sound as the market and the machinery around it. Several risks feed straight into the number:

• Oracle risk. The contract reads its price from a data feed, so a manipulated or delayed feed can move the value away from reality.
• Funding-rate pressure. Funding is the cost of holding the position, so activity that pushes the funding rate in one direction changes what holders pay and what the contract is worth.
• Liquidity. A thin market widens the gap between buying and selling and makes any single valuation less certain.
• Protocol or counterparty failure. In decentralized venues, the collapse of a protocol or a counterparty can wipe out a position regardless of what a model says it is worth.
• Open-ended writer exposure. On the classical side, the seller of a no-expiry option carries an obligation with no end date, because the contract can be exercised years later.

None of these are side notes for a valuation. Each one changes the fair value, and a credible analysis has to account for them rather than assume a clean market.

When Perpetual Options Become a Dispute

This is where the topic turns from a market story into a matter for counsel and the courts, and where the economics do the heavy lifting.

When a trader loses money on a contract that never ends, measuring the loss is harder than it is for an ordinary option, because there is no expiration date to anchor the calculation. The analysis has to reconstruct what the position was worth at each relevant point, and what it would have been worth under a different set of facts. When two sides disagree about the fair value of a perpetual option, the gap between their numbers is an economic question that turns on the funding rate, the volatility, the price feed, and the liquidity described above. And when a claim points to activity around the funding rate or the oracle price, whether that activity broke a rule is a legal question, while the economic question is how it affected the value of the contract and the size of any loss.

Work of this kind draws on the same tools used in business valuation and in the measurement of economic damages, applied to an instrument that most valuation practice has not yet had to price. When the dispute is a securities matter, it also connects to work in securities litigation, and because these products live largely in crypto, it overlaps with the analysis a cryptocurrency expert witness brings to digital-asset matters. I work on these questions directly. As an economist with a PhD and a CFA charter, and years of experience as a testifying expert witness in complex financial disputes, I help courts and legal teams reach a clear, defensible view of what a new instrument is worth and how a loss on it should be measured.

Where This Is Heading

Perpetual options are still early, but the direction is set. The funding-payment design has already reshaped crypto trading through perpetual futures. Regulators in the United States are now weighing how these contracts fit existing rules, and the same instruments are starting to appear on stocks and other assets. As they spread and as more money rides on them, the need to value them clearly and to defend that value under scrutiny will keep growing. For anyone facing a dispute in this area, understanding how a perpetual option is valued is no longer a fringe concern. It sits at the heart of the matter.

Frequently Asked Questions

What is a perpetual option?

It is an option with no expiration date. The holder keeps the right to buy or sell at a set strike price for as long as the position stays open, instead of losing the right on a fixed date.

What is the difference between a perpetual option and a perpetual future?

A perpetual future tracks the price of an asset one for one and has no strike price. A perpetual option carries a strike and pays only when the price moves past it. A perpetual call with a strike of zero behaves like a perpetual future.

Is a perpetual American option the same as an everlasting option?

Not quite. A perpetual American option is a classical no-expiry option that is rarely traded. The everlasting option is a crypto version, introduced in 2021, that stays open through a funding payment. Everlasting options exist partly because the classical version was so hard to price and to sell.

How are perpetual options valued?

One common method treats the contract as a basket of ordinary options that expire on different dates, held in shrinking amounts, and adds up their value. The result depends on the funding rate, the volatility of the asset, the price feed, and market liquidity.

Are perpetual options regulated in the United States?

Regulation is developing. In May 2026, the CFTC approved a bitcoin perpetual futures contract as a listed future, and in June 2026, CME filed suit, arguing that such contracts should be treated as swaps. Whether a given perpetual contract is a future or a swap is a question for the courts and the regulator.

Why does the value of a perpetual option matter in a legal dispute?

Because the amount at stake often depends on it. Measuring a loss, settling a disagreement over fair value, or assessing the effect of trading around the funding rate or the price feed all rest on a sound valuation of the contract.

Disclaimer: The views and opinions expressed in this article are solely those of the author and are provided for general informational purposes only. They do not necessarily reflect the views, opinions, or positions of CONEXIG, its partners, affiliates, or clients. Nothing in this article should be construed as legal, professional, or other advisory services or opinions, and readers should seek appropriate professional advice for their specific circumstances.