Mechanics · 8 min read
Everlasting options vs. streaming premium
Two ways to finance expirationless optionality, compared through their marks, cash flows, and path sensitivity.
“Perpetual option” describes a goal: preserve option-like exposure without a fixed expiry. Everlasting funding and streaming premium are two different ways to pursue it.
Everlasting funding: keep a mark near a payoff function
In the White and Bankman-Fried formulation, an everlasting option uses a funding transfer based on the difference between the derivative's mark and its current payoff. With a stated funding frequency, the no-arbitrage mark can be represented as a weighted basket of conventional options expiring at future funding times.
The model creates two visible economic channels:
- the mark changes as spot changes;
- funding accumulates while the position is held.
For a long position, modeled P/L is the signed change in mark minus cumulative funding. A short position reverses the mark exposure and receives the corresponding funding stream in the simple model.
Streaming premium: integrate cost along the path
A streaming design can begin without a full conventional premium paid upfront. Instead, premium accumulates through time. The generic V1 model in this Lab integrates a Black–Scholes theta reference along the selected path and concentrates that cost inside a configurable range around the strike.
That produces a very different intuition. Two paths with the same final spot can create different accumulated premium if one path spends more time near the strike. Range width, liquidity, fees, and the exact accumulation rule become contract-defining inputs.
Which one is “the” price?
Neither. The correct output is conditional: under this versioned mechanism and these assumptions, this is the modeled result. Funding-based models need a mark construction and funding interval. Streaming models need a premium-rate construction and path. Both need a volatility assumption.
The productive comparison is not which label sounds more perpetual. It is which mechanics create the exposure, cost profile, and risk transfer you intend to study.