The mood on commodity trading desks shifts by Friday afternoon, as traders transition from profiting from bets to managing risk until markets reopen on Sunday. However, with the rise of perpetual futures in crypto, traders can now hedge their positions over the weekend, potentially changing the dynamics of short-dated West Texas Intermediate crude options.
Researchers at Energy Aspects note that the implied volatility of WTI contracts, which typically fell on Fridays, has begun to narrow as traders can now hedge their exposure through perpetual futures. This development has implications for the 'weekend effect' in short-dated WTI options, where implied volatility is structurally depressed on Fridays. While institutional traders are still cautious, the growth of perpetual futures trading volume on crypto exchanges has created new opportunities for traders to capture profits over the weekend.
However, issues with infrastructure and liquidity remain, limiting the participation of large institutions. As the market evolves, traders are adapting to the new reality of 24/7 trading, and the traditional weekend routine may eventually become a thing of the past.