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, but as the weekend approaches, their primary concern becomes managing risk. The reason for this shift is that anything can happen while markets are closed, from unexpected geopolitical events to market-moving announcements, leaving traders with no ability to adjust their positions until trading resumes on Sunday evening. According to Mustafa Al Niama, former head of digital assets at Goldman Sachs, 'From about lunchtime on Fridays, the desk essentially stops thinking about making money and starts thinking about what they can tolerate for roughly 48 hours until the Sunday evening reopen.' This ritual is familiar to every commodities options trader, who must assess whether they are comfortable holding their position over the weekend, given the inability to adjust or rebalance their bets during this time.
As Terry Duffy, chairman and CEO of CME Group, notes, 'Risk, whether geopolitical or not, does not recognize weekends.' However, markets have traditionally been structured around a Monday-to-Friday schedule, with traders planning ahead for potential weekend and after-hours crises as part of their job. Earlier this year, an unusual event in the oil options market disrupted this long-standing routine. As tensions escalated between Iran and Israel, traders flocked to crypto exchanges over the weekend to trade derivatives contracts known as '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 shift highlights the emergence of a 24/7 venue for oil derivatives trading, which is distinct from traditional finance. Researchers at Energy Aspects note that the dynamics of pricing short-dated West Texas Intermediate crude options are set to change due to the rapid growth of perpetuals on crypto exchanges. For years, implied volatility for WTI contracts fell on Fridays, as traders were reluctant to pay for protection through options or derivatives that they couldn't actively manage while markets were shut.
However, this discount has begun to narrow, according to Energy Aspects. The availability of perpetual contracts allows traders to hedge their exposure over the weekend, which may lead them to hold or even buy options they previously would have sold before Friday's close. In theory, this could create an opportunity for traders to capture profits over the weekend if the market becomes chaotic.
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. While finding any edge to capture a few basis points of profit sounds like any trader's dream, for most traders, it's still likely to remain theoretical until continuous trading becomes more widespread. The biggest challenge in adopting perpetual futures is not the availability of markets but rather the underlying financial infrastructure.
Large institutions, such as banks, already have systems in place for traditional market hours, but they lack the infrastructure to support 24/7 trading. Even if weekend trading has sufficient volume, institutions will need a different structure to accommodate it. The existing infrastructure, including clearing and settlement systems, is not designed to handle around-the-clock trading.
As a result, the majority of volume in perpetual futures is still coming from retail traders, market makers, and proprietary trading shops. These traders are likely using perpetuals for basis trading or carry trades rather than hedging.
However, perpetual futures are starting to influence traditional markets, providing a tool for traders to gauge how the market will trade when it opens if news breaks out during the weekend. The emergence of perpetual futures might be the first sign that crypto innovations are influencing traditional finance.
Whether perpetual futures can reshape the traditional market remains uncertain, but there are signs that old habits are already beginning to change for traders. With the potential for continuous trading hours, some traders may no longer have to spend time waiting and can start making money either by trading or tracking these contracts.