By Friday afternoon, 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 Friday, their attention turns to managing risk, as they must tolerate potential market fluctuations until Sunday evening when markets reopen.
The 48-hour period can be particularly challenging for traders holding positions tied to highly active markets, as they are unable to adjust their bets until trading resumes. According to Mustafa Al Niama, former head of digital assets at Goldman Sachs, 'From about lunchtime, the desk essentially stops thinking about making money and starts thinking about what they can live with for roughly 48 hours until the Sunday evening reopen.' This ritual is well-known among commodities options traders, who by the end of the week, are more concerned with their comfort level regarding potential market movements while the markets are closed, as they cannot adjust their bets over the weekend. 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 still largely operate on traditional weekday schedules. For decades, traders have had to plan ahead for potential weekend and after-hours catastrophes as part of their job.
Earlier this year, an unusual event occurred in the oil options market, disrupting this long-standing routine. As tensions escalated between Iran and Israel, traders flocked to crypto exchanges over the weekend to trade derivatives contracts called 'perpetual futures,' which operate around the clock. The total value of all 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 highlights the emergence of a 24/7 venue for oil derivatives trading, while traditional finance remains offline.
Martin Lee, market insights lead at DWF Labs, notes that 'we're roughly seeing 2-3x more volume on average on weekdays vs weekends for oil perps on Hyperliquid over the last 3 months.' The growth of perpetual futures on crypto exchanges may also influence the dynamics of short-dated West Texas Intermediate (WTI) crude options. Researchers at Energy Aspects suggest that the implied volatility of WTI contracts, which previously fell on Fridays, may begin to narrow as traders can now hedge their exposure through perpetual futures over the weekend. This development has implications for the 'weekend effect' in short-dated WTI options, where implied volatility is structurally depressed on Fridays.
In theory, this could create an opportunity for traders to capture profits over the weekend if the market becomes chaotic, rather than simply sitting on their positions. Energy Aspects estimates that if a continuous futures contract is available, it would create roughly 40% more hedging sessions over the life of a typical contract.
The rise of perpetual futures may also influence how traders behave, with some traders watching crypto markets throughout the weekend to gauge where traditional futures may begin trading once the CME opens. This might be the first signal 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.
Perhaps the biggest impact of perps thus far is that the instrument might be influencing how some traders behave. 'For the crypto industry, it actually is a big deal because for the longest time, we as an industry have always been the student,' said Al Niama.
However, perps might become one of the first ideas moving in the opposite direction, where traditional finance is potentially influenced by crypto innovations. Whether perps can actually reshape the traditional market remains uncertain, but there are signs that on Friday afternoons, old habits are already beginning to change for traders.