A perpetual put option is a financial derivative that grants the holder the right, but not the obligation, to sell an underlying asset at a specified price, known as the strike price, without an expiration date. Unlike traditional options, it does not expire, providing continuous downside protection. This instrument allows investors to hedge against potential price drops indefinitely. It typically involves periodic funding payments between parties to maintain the position.
Context
In the decentralized finance space, perpetual put options are gaining traction as tools for hedging cryptocurrency portfolios and managing risk. News reports often analyze their utility in volatile markets, allowing participants to secure a minimum selling price for their digital assets. The relevance to digital economics includes providing new avenues for risk management and capital allocation within decentralized exchanges and lending platforms.
The new non-consumable financing primitive embeds principal protection into fundraising, setting a precedent for risk-mitigated, yield-funded capital formation.
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