How it works

The instrument: a perpetual option#

What trades here is a perpetual option: a call or a put that never expires on a fixed date. It is American, so it is never worth less than what it would pay if exercised right now.

Its price has two parts. Intrinsic is the contract's own part — what the option would pay today, set by the strike and the mark, nothing more. Extrinsic is the market's part — what people will pay on top of that for the chance it pays more later. Intrinsic is never charged for holding; extrinsic is.

Funding is the roll#

A perpetual option still ages. Its time value wears away at a rate, and keeping the claim whole means buying back what wore away. Funding is the cost of that roll, charged each tick: the leg's extrinsic, read at the oracle's relevant side and at the leg's own decay, times the leg's rate per year, for the time that has passed.

The oracle's relevant side is its bid for a long leg and its ask for a short leg (the oracle is explained in section 5). The holder bears the cost of the roll and the other side of the claim receives it: a long pays, a short receives. The size of the position never changes, and funding alone never liquidates anything — it is one more number in the account's equity.

Decay is a mean life in months#

Where a listed option has an expiry date, this one has a decay: its mean life, in months, picked on a stepper from six rungs — 3, 6, 12, 24, 55 and 120. The leg's rate per year is 12 divided by its months, so a 3-month decay rolls four times as fast as a 12-month one: it is cheaper to buy and dearer to hold.

The DECAY box on the OPTION ticket and the DECAY stepper on the chart toolbar are one number shown in two places. Moving either moves both. If you type a decay nobody quotes, the ticket snaps to one somebody does.

Strikes are read as a % from the mark#

A strike is fixed in dollars when you open. Afterwards the screen reads it as a percentage from the current mark, so +20 % follows the market rather than the calendar. The ticket takes either a % or a dollar figure and converts both ways. Strikes further than 60 % from the mark are not quotable: far-out prices are tiny, and a small mispricing there is a large multiple.

TRANSACT has three tickets#

OPTION opens one call or put, bought or sold. You type a quantity in coin and a strike; the ticket shows the PRICE in dollars first (the fraction of spot second), one PREMIUM / MARGIN row and a signed FUNDING / YR. It opens into your OPTIONS account with no perp behind it. A bought option costs its premium and nothing more; a sold one is margined in the account's one margin test (section 3).

PERP is CREATE PERP, where you choose PROTECT or FARM and a perp opens with the option structure that goes with it — also in section 3. EARN is the maker side: you post a curve instead of a ticket (section 4).

Every trade is at the front#

Makers quote; the front is the best quote on each side at each strike and decay across the makers standing. An open, a close and a liquidation all trade at the front — never at a model price and never at the mark. The front, and which quotes may set it, is in section 5.

If your size is bigger than the makers at that strike can fill, you get one line — "only X BTC available at this strike right now" — and TRANSACT stays disabled until the size fits. A swap's two legs each cross the market once, so its total slippage is 1 − (1 − s₁)(1 − s₂), never the sum.

Where it runs#

The ledger, the front and the margin for sold options all run in contracts on the Elysium testnet. Money and the perps stay on HyperCore. The service on Railway reads the chain, pushes the oracle and the marks in, and relays what you sign. The chip in the header names the ledger version and the last block read, and appears only while the service can reach the chain. Section 8 has the whole picture.

What it does not show you#

How much room the makers have left. This is a request-for-quote venue: publishing aggregate capacity would publish where the book is thin. The only capacity number ever printed is the answer to a size you already asked for. Makers are anonymous too — you see yourself and the aggregate, never a name.