The traditional Friday afternoon mood shift on commodity trading desks is evolving. Traders, who spend the first four days of the week trying to profit from their bets, are now thinking about risk tolerance until markets reopen on Sunday evening.
However, with the rise of perpetual futures in crypto markets, traders can now react to market changes over the weekend without waiting for traditional markets to reopen. This shift has significant implications for the oil market, particularly in the pricing of short-dated West Texas Intermediate crude options. The growth of perpetual contracts has led to a decrease in the Friday discount in implied volatility, as traders can now hedge their exposure over the weekend. While institutional traders have been slow to adopt perpetual futures due to liquidity concerns and infrastructure limitations, the rise of crypto-native firms, proprietary trading shops, and savvy retail traders has driven the growth of perps.
The increasing use of perps has also provided traders with a tool to gauge market direction after the weekend, reducing the uncertainty of traditional market openings. As the crypto industry continues to influence traditional finance, the potential for 24/7 markets may become a reality, revolutionizing the way traders approach the weekend.