By Friday afternoons, the atmosphere on commodity trading desks undergoes a significant shift. For the first four days of the week, traders focus on maximizing their profits. However, by lunchtime on Fridays, their attention turns to managing risk, as they must tolerate potential market fluctuations until Sunday evening when markets reopen. The inability to adjust or rebalance bets during this period can be challenging, especially when holding positions tied to highly volatile markets.
According to Mustafa Al Niama, former head of digital assets at Goldman Sachs, 'From about lunchtime, the desk basically stops thinking about making money and starts thinking about what they can live with for roughly forty-eight hours until the Sunday evening reopen.' This ritual is familiar to every commodities options trader, who must assess whether they are comfortable with their position if unexpected events occur while markets are closed. Terry Duffy, chairman and CEO of CME Group, notes that 'Risk, geopolitical or not, does not know what day of the week it is.' However, markets have traditionally operated on a weekday schedule, and traders have had to plan accordingly for potential weekend and after-hours crises.
Earlier this year, an unusual event in the oil options market disrupted this long-standing routine. As tensions escalated between Iran and Israel, oil-linked futures experienced a sudden surge in volume over a weekend in March. Although traditional commodity markets were closed, traders did not need to wait for the market to reopen before reacting. Instead, they turned to crypto exchanges to trade 'perpetual futures,' which operate around the clock.
The total value of active contracts on the decentralized exchange Hyperliquid reached a record $1.2 billion on March 8, a Sunday when traditional commodity markets were closed. While weekend volume is still smaller than on weekdays, it is no longer negligible.
This shift highlights the emergence of a 24/7 venue for oil derivatives trading, which is transforming the traditional finance landscape. Researchers at Energy Aspects note that the growth of perpetual futures on crypto exchanges is changing the dynamics of short-dated West Texas Intermediate (WTI) crude options. For years, implied volatility for WTI contracts has decreased on Fridays, as traders were reluctant to pay for protection they could not actively manage while markets were closed. However, with the availability of perpetual contracts, traders can now hedge their exposure over the weekend, potentially reducing the 'weekend effect' in short-dated WTI options.
In theory, this development could create new opportunities for traders to capture profits over the weekend if markets become chaotic. Energy Aspects estimates that the availability of continuous futures contracts could create approximately 40% more hedging sessions over the life of a typical contract. The rise of perpetual futures is also influencing traditional markets, with traders using them to gauge the direction of bets after the weekend.
Hein Tibosch, head of digital assets OTC and product at Flow Traders, notes that perpetual markets have become an additional source of information before traditional markets reopen. The trader at the proprietary market-making firm describes a similar shift, stating that 'It's not really a surprise anymore by Sunday's open,' as traders increasingly watch crypto markets throughout the weekend to anticipate where traditional futures may begin trading once the CME opens. This might be the first indication that perpetual futures are starting to influence traditional markets, not as a replacement for CME, but as another source of price discovery while the rest of the market sleeps. The impact of perpetual futures on traditional markets remains uncertain, with volumes still modest and big-money institutions cautiously watching.
However, there are signs that old habits are changing, and traders are adapting to the new reality of continuous trading hours. As Flow Traders' Tibosch notes, 'For lots of players, for example, a hedge fund or quant shop, if you can just have your strategies run instead of five days a week, seven days a week, that's two extra days of trading.' The future of trading may be 24/7, and it is time for trading desks to prepare for an around-the-clock market, abandoning the old routine of the 'weekend effect.'