The traditional Friday afternoon mindset on commodity trading desks is undergoing a significant shift. Instead of focusing solely on managing risk until markets reopen on Sunday evening, traders are now considering the opportunities presented by continuous trading hours. With the rise of perpetual futures contracts on crypto exchanges, traders can hedge their positions and react to market developments over the weekend, reducing the need to liquidate positions before Friday's close.
This development has implications for the 'weekend effect' in short-dated WTI options, where implied volatility is typically depressed on Fridays. As perpetual contracts become more widely available, traders may be willing to hold or even buy options they previously would have sold before Friday's close, potentially creating new profit opportunities.
While institutional traders are still cautious about entering the market due to liquidity concerns and infrastructure limitations, the growth of perps trading volume and the increasing importance of crypto markets as a source of price discovery may eventually lead to a shift in the traditional market's behavior. As the lines between traditional finance and crypto continue to blur, it's possible that the old routine of the 'weekend effect' may become a thing of the past, and trading desks may need to adapt to a 24/7 market.