From Perps to Options: The next frontier of on-chain finance

Introduction

As more and more TradFi products migrate on-chain, several protocols have chosen to explore the options segment. This product, a pillar of traditional finance, is now being deployed by various actors within DeFi.

While perps are essentially a spot extension with a funding mechanism, options require active management of the volatility surface and deep liquidity across dozens of strikes and expiries.

This complexity explains why DeFi options account for roughly 0.2% of the on-chain perpetuals volume today. It’s still a niche, but it's the perfect complement to perps for anyone looking to build high-alpha strategies.

In this article we decided to take a look at the fundamental concepts to better understand these products and the protocols currently offering access to onchain options.

Master the basics

Before trading options, you need to master the basics, anon.

Options trading on DeFi Options Exchanges (DOEX) requires a clear understanding of asymmetric payoff profiles. Unlike perps, exposure is no longer linear, it depends on the "Greeks," which measure how different variables affect an option's price:

• Delta: Measures the sensitivity of the option's price to changes in the price of the underlying asset. It tells you how much the option's value will move for every $1 change in the asset.
• Gamma: Represents the rate of change of Delta. It measures how much the Delta itself will move as the underlying asset price changes, reflecting the "acceleration" of your position.
• Theta: Quantifies time decay. It tells you how much value the option loses every day as it approaches its expiration date.
• Vega: Measures sensitivity to implied volatility. It shows how much the option's price will change based on a 1% move in the market's expectation of future volatility.
• Rho: Measures the sensitivity of an option's price to changes in interest rates.

Buying options is typically the preferred tool for participants seeking asymmetric exposure, allowing traders to gain significant market upside with a known and limited downside.

For instance, a Directional Call (Bullish) is used to capture upside in the underlying asset with built-in leverage, providing a way to profit from price increases without owning the asset itself.

Conversely, a Directional Put (Bearish) serves either as a hedging instrument to protect an existing portfolio or as a way to speculate on downward price moves.

Risk profile

When buying options, losses are capped at the premium paid, while potential gains remain theoretically unlimited.

Conversely, selling directional options is a premium-capture strategy similar to selling insurance. It exposes the seller to the risk of total collateral loss if gamma exposure becomes unmanageable.

In periods of uncertainty, non-directional strategies allow traders to bet on an expansion in implied volatility (IV) through structures like straddles or strangles. By combining a call and a put, the trader removes directional bias and focuses solely on the magnitude of the price move.

The success of these strategies depends on whether realized volatility exceeds the implied volatility priced into the premium at entry, with Theta (time decay, which erodes the option's value daily) working against the buyer with every passing day.

Understanding these mechanics is the first step, but the real challenge lies in execution. In a landscape where liquidity is king, a few DeFi protocols have managed to build the infrastructure necessary to support these strategies.

Key players

Here are the 3 major players currently defining the space.

Derive (ex-Lyra): App-Chain infrastructure

Derive has evolved beyond general-purpose L2 constraints by launching its own App-Chain, built on the OP Stack, to better control performance and market microstructure. It currently holds around $90-100M in TVL, with a 30-day perp volume over $200M and options notional exceeding $500M.

• Strengths: Derive delivers a CEX-like experience through an on-chain CLOB, which is better suited to options than AMM designs. Its native integration with Ethena, using USDe as collateral, enables strong margin efficiency while generating passive yield on idle collateral.
• Limitations: Relying on a dedicated infrastructure can create liquidity silos, limiting composability. Despite strong performance, tight spreads still depend heavily on the presence of institutional market makers, making liquidity less organic in low-activity regimes.

Rysk: Dynamic Hedging Vault (DHV)

Rysk stands out as the dominant volatility yield layer built natively on Hyperliquid. With a TVL of ~$50M (split across Hyperliquid and Arbitrum), it has generated ~$2M in 30-day option premiums with a cumulative notional >$593M.

Unlike Derive, Rysk focuses on automated, yield-oriented strategies through its Dynamic Hedging Vault (DHV): covered calls and cash-secured puts.

• Strengths: Unlike traditional AMMs, Rysk actively targets a delta-neutral exposure. The protocol dynamically adjusts pricing to incentivize traders to rebalance the vault's risk. Its integration on Hyperliquid gives it access to deep liquidity and low-latency execution that most on-chain options protocols simply can't match.
• Limitations: Hedging costs can erode returns during high volatility. It remains an early-stage protocol; reaching $50M after targeting a $10M milestone in mid-2025 is impressive growth, but organic liquidity depth is still being established.

Kyan (by Premia): Performance through modularity

Kyan represents the pivot from Pool-to-Peer models toward a hybrid infrastructure centered on a Central Limit Order Book (CLOB). Despite a lower TVL of ~$700k, its cumulative notional has passed $394M.

• Strengths: The protocol allows risks to be netted across options and perpetuals within a single portfolio, significantly reducing margin requirements. Its hybrid architecture creates an advanced environment for complex strategies, such as short gamma positions hedged directly with perps.
• Limitations: Currently in Beta and designed strictly for professional traders. Margin calculations are performed off-chain via API; while this enables low-latency execution, it requires users to trust the protocol’s internal risk engine rather than a fully transparent on-chain logic.

Other protocols

Here you can find other honorable mentions of protocols offering options trading in crypto today:

• Dream: a newly launched protocol for options trading.
• Euphoria: a gamified way to play with options trading. (insert article sur mega)
• Polynomial (shut down on February 13th 2026)

Why is volume stalling?

DeFi options exchanges are not a simple replica of the well-known TradFi instrument.

While the theoretical potential of on-chain options is massive, the sector faces significant structural headwinds that prevent it from reaching the same scale as the perpetuals market.

Moving from a linear instrument like a perp to a non-linear one like an option exposes the inherent limitations of current blockchain infrastructure, from liquidity fragmentation to latency constraints.

The cost of fragmented liquidity

On a spot DEX or a perp DEX, liquidity is concentrated on a single pair (e.g. BTC/USD). Options, by contrast, require liquidity to be spread across dozens of strike and expiry combinations.

This dispersion mechanically results in shallower markets.

Arbitrage versus centralized

CLOBs Platforms like Deribit retain their dominance because they offer near-zero latency, which is essential for market making.

DeFi, even with App-Chains, still suffers from a latency tax that ultimately shows up for users through wider spreads.

No clearinghouse backstop

In TradFi, the OCC guarantees solvency at the system level. In DeFi, there is no clearinghouse: solvency relies entirely on collateral locked in smart contracts.

Oracle-dependent settlement

Unlike regulated markets where settlement prices are institutional and stable, on-chain option settlement depends on oracles, which introduce latency and, in worst cases, manipulation risk.

Slippage in DeFi options is more complex than in standard AMMs, and its mechanics differ depending on the model.

On vault-based protocols (e.g. Rysk), when a trader executes a large order, the pool acting as counterparty becomes exposed to significant directional risk. To protect itself, the algorithm adjusts the skew, which directly impacts the execution price. The larger the order, the more aggressively the skew shifts, making large directional trades increasingly costly.

On order-book-based protocols (e.g. Derive), slippage is a function of market depth across strikes and expiries. Given how thin liquidity is when spread across dozens of combinations, a large order can quickly exhaust available liquidity at the quoted price, resulting in significant price impact, even on a CLOB.

Either way, as soon as the book or vault become imbalanced, execution prices can diverge sharply from quoted prices, making large-scale hedging strategies extremely costly on-chain.

Treat DeFi options as high-risk, high-skill instruments. Start small, diversify, and avoid leverage unless you fully understand the Greeks.

In most cases, perps or CLOB DEXs remain far more efficient.

Conclusion

As we see more financial products get integrated onchain, we can expect more traditional finance players to tokenize access to their options, eliminating many hurdles present in the current system design of the protocols we have covered in this article.

Unfortunately, today options remain a marginal product of the crypto ecosystem. Unlike perps, where the funding mechanism stays intuitive, options require active management of the Greeks and their interactions. That learning curve sits closer to professional trading than retail speculation, structurally capping the addressable audience. Thin liquidity does the rest, preventing the few who do engage from trading with any meaningful size.

However, with growing institutional interest, protocols offering the right 'rails' deserve attention, as traditional firms will likely acquire or implement them to scale.