The traditional Friday afternoon mood on commodity trading desks is changing, as traders are no longer solely focused on managing risk until markets reopen on Sunday evening. With the rise of perpetual futures contracts, also known as 'perpetuals' or 'perps', traders can now hedge their exposure over the weekend, potentially creating new opportunities for profit.
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.' The growth of perps trading has been significant, with the total value of active contracts on the decentralized exchange Hyperliquid hitting a record $1.2 billion on a Sunday in March. While weekend volume is still smaller than on weekdays, it is no longer just a blip, and the dynamics of how traders price short-dated West Texas Intermediate crude options are set to change. Researchers at Energy Aspects note that the implied volatility for WTI contracts, which had traditionally fallen on Fridays, has begun to narrow, as traders can now hedge their exposure through the weekend.
The availability of perps has also led to a shift in trader behavior, with some traders willing to pay a higher price for volatility on different venues. However, the lack of meaningful liquidity and infrastructure issues are major reasons why institutional traders are still staying away from perps. Despite these challenges, the rise of perps is likely to continue, and may eventually influence traditional markets, with CME's proposed 24/7 futures contract trading potentially paving the way for a broader shift towards continuous trading hours.