A covered call is usually described as one of the simplest options structures: Own the underlying asset and sell a call against it.
In crypto markets, however, there is another way to create broadly similar directional exposure. Instead of holding ETH spot, a trader can hold a long ETH perpetual futures position and sell an ETH call against that exposure.
That raises an important question: If the call may remain open for months, is it better to hold ETH spot or keep the long perpetual?
At TerraMatris, this is not just a theoretical question. We have been managing an actual 0.1 ETH position while continuously rolling the short-call side, giving us enough funding history to examine what the perpetual has really cost.
This article documents that experience and the framework we use to decide when perpetual exposure still makes sense - and when spot ETH may become the cleaner alternative.
For broader context on how we manage ETH options exposure, see our Ethereum Strategy.
The Position
The long side of the position consists of:
- Long 0.1 ETH perpetual
- Original entry around $3,051 per ETH
Against that exposure, we had sold an ETH call with:
- $2,100 strike
- October 30 expiry
As the strategy evolved, we decided to roll the call further out and increase the strike.
The $2,100 call was bought back at approximately:
$638.70 per ETH
We then sold a new call expiring June 25, 2027 with a:
$2,400 strike
for approximately:
$697.30 per ETH
The difference was:
$697.30 − $638.70 = $58.60 per ETH
But our actual position is only 0.1 ETH.
Therefore, the actual credit received by the portfolio was approximately: $5.86
That distinction matters. Options prices are often quoted on a one-unit basis, while the actual portfolio result depends on contract size.
What the Roll Achieved
Although the cash credit itself was relatively small, the roll improved the structure in two ways.
First, we collected approximately $5.86 instead of paying to make the adjustment.
Second, we moved the short-call strike from: $2,100 → $2,400
That creates another $300 per ETH of potential upside before the call strike is reached.
For a 0.1 ETH position, that represents: $30 of additional potential exit value
compared with remaining capped at $2,100.
The trade therefore exchanged time for a better strike while still receiving a small credit.
That is one of the recurring ideas behind our ETH strategy: we are not necessarily trying to maximize premium on every individual trade. Sometimes improving the structure of the position is more valuable than maximizing immediate income.
But Is This Really a Covered Call?
A traditional covered call looks like this: Long ETH spot + Short ETH call
Our structure is slightly different: Long ETH perpetual + Short ETH call
From a directional perspective, the two can behave similarly.
If ETH rises, both the spot position and the long perpetual generally gain value.
If ETH falls, both lose value.
But the risk structure is not identical.
A perpetual futures position introduces additional variables that spot ETH does not have:
- funding payments;
- margin requirements;
- liquidation risk;
- collateral management;
- exchange-specific mechanics.
The most persistent of these is funding.
What Is Perpetual Funding?
Perpetual futures have no fixed expiry date.
To keep their price reasonably close to the underlying spot market, exchanges use a funding mechanism.
On Bybit, funding payments are exchanged between long and short perpetual holders at scheduled funding times. When the funding rate is positive, long positions pay short positions. When funding is negative, short positions pay longs. Bybit calculates the funding payment using the position value multiplied by the applicable funding rate.
This means that a perpetual position can theoretically be held indefinitely, but it does not necessarily have zero carrying cost.
A long position held during a predominantly positive funding environment will gradually pay funding.
That matters much more when a trade intended to last a few days becomes a position held for many months.
Our Actual ETH Funding Cost
Rather than relying only on theoretical funding rates, we reviewed our own Bybit ETH perpetual history.
Between April 1 and September 30, 2026, our 0.1 ETH long generated:
- 549 funding settlements
- approximately $4.05 paid
- approximately $1.16 received
- approximately $2.89 net funding cost
That works out to an effective annualized funding cost of approximately:
2.6%
over the full observed period.
Funding was not constant, however.
More recent periods were somewhat more expensive, with the effective annualized rate generally moving into roughly the 4–5% range.
This is an important observation. Funding should not be thought of as a fixed interest rate.
It changes according to market conditions, and Bybit can also use different funding intervals for different contracts. Funding parameters may be adjusted during periods of unusual volatility.
Was the Perpetual Expensive to Hold?
So far, not really. A net six-month funding expense of roughly $2.89 on a 0.1 ETH position is small in absolute terms.
Even if funding remains closer to the more recent 4–5% annualized range, the expected dollar cost on approximately $300 of ETH exposure remains relatively modest.
For example, at a hypothetical 5% annual funding cost: $300 × 5% = $15 per year
For nine months: approximately $11.25
The exact number will vary because both ETH's price and the funding rate change continuously.
Still, this puts the question into perspective.
We should certainly monitor funding, but a few dollars of expected funding expense may not justify restructuring an otherwise manageable position.
The Real Cost Is Not Just Funding
Funding is only one consideration. The more important difference between spot ETH and a long perpetual is the balance-sheet structure.
If we hold: 0.1 ETH spot
there is no liquidation price associated with simply owning the asset.
The market value can fall dramatically, but the ETH remains in the account unless we sell it.
With: 0.1 ETH perpetual the position depends on available collateral and margin conditions.
Bybit USDT perpetual contracts use USDT for margin and settle profit and loss in USDT. Their order cost depends partly on leverage and required margin.
That means a perpetual position adds another layer of portfolio management that a simple spot position does not require.
For a heavily leveraged trader, this difference can be substantial.
For a conservatively collateralized 0.1 ETH position, it may be much less important.
Why We Have Not Automatically Converted to Spot
At first glance, replacing the perpetual with spot seems obvious.
Spot has:
- no perpetual funding;
- no derivative liquidation mechanism;
- simpler long-term ownership.
But changing the position also has a cost.
We would need to:
- close the perpetual;
- buy 0.1 ETH spot;
- pay the relevant trading costs and spreads;
- potentially change how capital is allocated inside the derivatives portfolio.
Meanwhile, our historical funding expense has remained small.
The decision therefore should not be:
Perpetuals charge funding, therefore spot must always be better.
Instead, the correct question is:
Is the expected future funding and margin complexity large enough to justify changing the structure?
So far, for this particular position, our answer has been no.
A Practical Funding Framework
We do not believe there is a universal funding-rate threshold at which every trader should switch from perpetuals to spot.
Portfolio size, collateral, leverage and strategy duration all matter.
For our own monitoring, however, a framework like this is useful:
0–5% annualized funding
Generally a relatively small consideration for a modest position.
5–10% annualized
Worth paying closer attention to, especially if the position is expected to remain open for many months.
Above 10% for an extended period
The economics of holding the perpetual begin to deserve serious scrutiny.
At that point, spot ownership may become increasingly attractive if there is no strategic need for the leverage or derivatives structure.
These are not hard trading rules. They are portfolio-management thresholds that help us decide when a previously minor expense is becoming material.
Why Long-Dated Calls Make Funding More Important
Funding is easy to ignore when a perpetual trade lasts a few days.
It becomes much more relevant when options management extends the life of the position.
Our short call now expires on:
June 25, 2027
That means the long leg could potentially remain open for many additional months.
Even a modest annual funding rate can accumulate over a sufficiently long period.
This creates a useful distinction.
For short-term options trading, funding may be close to noise.
For a position that is repeatedly rolled for one or several years, funding becomes part of the strategy's structural return.
The Longer-Term Question
There is another scenario we need to consider.
Suppose we continue rolling the call:
$2,400 → $2,600 → $2,800 → higher strikes
while keeping the same underlying 0.1 ETH exposure.
At some point, the original temporary derivatives position could effectively become a permanent ETH holding with an options overlay.
If that happens, the argument for owning spot becomes stronger.
Why continually pay even a small funding cost for exposure that we intend to maintain indefinitely?
At that stage, converting the long perpetual into spot ETH could simplify the strategy:
Long ETH spot + systematically managed calls
instead of:
Long ETH perpetual + systematically managed calls + ongoing funding management
That decision does not need to be made today.
But it is something we will continue monitoring.
Premium Is Not the Same as Profit
This position also illustrates another principle we repeatedly emphasize at TerraMatris.
Receiving premium does not automatically mean earning profit.
When we sold the June $2,400 call for approximately $697.30 per ETH, that number alone looked substantial.
But we first had to spend approximately $638.70 per ETH to close the previous call.
The true roll credit was therefore:
$58.60 per ETH
and because our position is only 0.1 ETH:
approximately $5.86 for the actual portfolio
That is the economically relevant number.
The new premium should never be treated as though the old obligation disappeared for free.
What We Are Monitoring
For this position, we are now watching several variables rather than focusing exclusively on option premium:
- the 30-day and 90-day effective ETH perpetual funding rate;
- total cumulative funding paid;
- ETH price relative to the $2,400 short-call strike;
- available margin and liquidation risk;
- the remaining time value in the June 2027 option;
- opportunities to roll the strike higher;
- whether the position is becoming sufficiently permanent that spot ownership would be more logical.
This is increasingly how we think about options strategies at TerraMatris.
The objective is not merely to sell another option.
It is to improve the economics of the entire position over time.
Bottom Line
A long ETH perpetual paired with a short call can resemble a conventional covered call, but it is not identical.
The perpetual introduces funding, collateral and liquidation considerations that do not exist when simply holding spot ETH.
Our own experience, however, shows why those costs need to be measured rather than assumed.
Across 549 funding settlements covering roughly six months, our 0.1 ETH perpetual generated a net funding expense of only about $2.89.
That is real money, but it has so far been small relative to the position.
Our latest call adjustment also demonstrates the broader strategy.
We rolled from the October $2,100 call to a June 2027 $2,400 call, collected approximately $5.86 of actual portfolio credit, and improved the strike by $300 per ETH — equivalent to another $30 of potential upside on our 0.1 ETH position.
For now, the numbers do not give us a strong reason to replace the perpetual purely to eliminate funding.
But the longer we hold the exposure, the more important that calculation becomes.
If funding rises materially or if this position evolves into a permanent ETH holding, moving the underlying exposure to spot may eventually become the simpler and more efficient structure.
Until then, we will continue treating funding exactly as we treat option premium, transaction costs and margin:
as part of the strategy's real return, not as an afterthought.
Read more about the broader approach in our Ethereum Strategy.