# Perpetual Options Explained Perpetual options in GammaSwap are not synthetic and do not require an [oracle](/resources/glossary.md#oracle). They offer permissionless leverage on any token. To open a position, a user borrows liquidity according to their selected leverage ie [Loan to Value (LTV)](/resources/glossary.md#loan-to-value) ratio. \ \ The higher the LTV, the higher the leverage but the position will be closer to liquidation. When a perpetual option position is opened, LP tokens in the pool are borrowed and burned for the underlying tokens which are held as collateral in the smart contract. If there is volatility in excess of borrow fees, the user profits because the perpetual option (the loaned collateral) accrues value faster than the debt.\ \ Perpetual option traders pay a borrow rate to liquidity providers to hold their positions. Unlike a perpetual future, there is no liquidation price. Instead, there is a [time to liquidation](/resources/glossary.md#time-to-liquidation) based on the current [LTV](/resources/glossary.md#loan-to-value-ltv) and borrow rate. The time to liquidation is variable based on utilization of the pool and is shorter with higher leveraged positions. ## Straddle Position A straddle position is a borrowed LP position where the collateral withdrawn is in a 50:50 ratio. It is the direct opposite of an LP position. A trader should open a straddle position when they want to long volatility but don't have a preference on the price direction OR if they want to hedge a full range LP position. Straddle have little to no price impact when the position is opened or closed since there is minimal rebalancing that needs to occur. For those familiar with the volatility smile, they are the cheapest position to open because they are essentially at the money (ATM). The delta (leverage) of a straddle position will initially start at 0 and will increase as the price moves farther away from the entry price.

PnL is the vertical axis, Price Change is the horizontal axis. Assuming 99% LTV

## Long Position A long position is a borrowed LP position where the collateral is rebalanced towards the more volatile asset. For example, if a trader opens a $1,000 notional long position, 60% of the position will be in ETH ($600) and 40% of the position will be in USDC ($400).\ \ The purpose of this rebalancing is to make the price exposure more directional and to mimic the returns of a call option.\ \ The delta (leverage) of a long position will initially start positive but it is not fixed like a future. It can increase or decrease as the price changes. The leverage will start at 1-5x and will increase as the price moves farther away from your entry.

PnL is the vertical axis, Price Change is the horizontal axis. Assuming 99% LTV

## Short Position A short position is a borrowed LP position where the collateral is rebalanced towards the more stable asset. For example, if a trader opens a $1,000 notional short position, 60% of the position will be in USDC ($600) and 40% of the position will be in ETH ($400).\ \ The purpose of this rebalancing is to make the price exposure more directional and to mimic the returns of a put option. The delta of a short position will initially start as negative but like the other positions it will change with volatility. The leverage will start at 1-3x and will increase as the price moves farther away from the entry.

PnL is the vertical axis, Price Change is the horizontal axis. Assuming 99% LTV

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