> ## Documentation Index
> Fetch the complete documentation index at: https://docs.tradealpha.app/llms.txt
> Use this file to discover all available pages before exploring further.

# Options vs Perps

> How perpetual futures compare to options contracts — payoff, complexity, time decay, and when each makes sense.

Both **options** and **perpetual futures (perps)** let you bet on a stock's price with leverage — without owning the stock. But they work very differently. This page breaks down the key differences so you can decide which fits your style.

## Quick comparison

|                    | Options on Robinhood              | Perps on Alpha                        |
| ------------------ | --------------------------------- | ------------------------------------- |
| Direction          | Calls (up) / Puts (down)          | Long (up) / Short (down)              |
| Expiry             | Yes — every contract expires      | No — hold as long as margin is met    |
| Time decay (theta) | Yes — value erodes daily          | No                                    |
| Leverage source    | Built into the premium            | Set explicitly by you                 |
| Max loss           | Premium paid (long options)       | Your margin (can be liquidated)       |
| Pricing complexity | High — Greeks, IV, strike, expiry | Low — price tracks the stock          |
| Best for           | Defined-risk, event-driven bets   | Simple directional bets with leverage |

## How payoff works

### Options

You pay a **premium** upfront for the right to buy (call) or sell (put) at a specific **strike price** before **expiry**. Your profit depends on where the stock lands relative to the strike, how much time is left, and changes in implied volatility.

* Move the right way fast enough → big gains
* Move the wrong way, or not enough, or too slowly → premium decays to zero

### Perps

You open a **long** or **short** position at the current price. Your P\&L moves linearly with the stock — up 1%, you make 1% × your leverage. Down 1%, you lose 1% × your leverage.

* No strike, no expiry, no theta
* Liquidation risk if the trade moves far enough against you

## Time decay

Options lose value as they approach expiry — even if the stock doesn't move. This is called **theta decay**.

Perps have **no time decay**. The only ongoing cost is the [funding rate](/intro/perpetual-futures), which is typically small and can even pay you depending on the direction.

## Complexity

Pricing an option requires understanding:

* Strike price
* Expiry date
* Implied volatility
* The Greeks (delta, gamma, theta, vega)

Pricing a perp requires understanding:

* The current stock price

That's it. Perps are designed to behave like the underlying — just with leverage and the ability to short easily.

## When options make more sense

* You want **defined max loss** (long calls/puts cap your loss at the premium paid)
* You're trading a **specific catalyst** (earnings, FDA decision) on a known date
* You want to express a view on **volatility itself**, not just direction
* You're running **multi-leg strategies** (spreads, condors, etc.)

## When perps make more sense

* You want a **simple directional bet** without learning the Greeks
* You want **no expiry** — hold the trade as long as your thesis is intact
* You want to **short easily** without borrow fees or share availability issues
* You want **leverage you control** explicitly, not baked into a premium

## The bottom line

Options are powerful but complex — great for defined-risk, time-sensitive trades. Perps are simpler — you pick a direction, pick your leverage, and your P\&L tracks the stock until you close or get liquidated.

If you've ever thought *"options are too complicated, I just want to bet on the stock going up or down"* — perps are built for you.