The mood on commodity trading desks shifts by Friday afternoon, as traders transition from focusing on making money to managing risk over the weekend. With traditional markets closed, traders are now turning to crypto exchanges to trade derivatives contracts, known as 'perpetual futures,' which operate 24/7. This shift has significant implications for the oil market, where traders can now hedge their exposure over the weekend. Researchers at Energy Aspects note that the dynamics of short-dated West Texas Intermediate crude options are set to change due to the growth of perpetual futures on crypto exchanges.
While institutional traders are cautious, the ability to hedge over the weekend is valuable, and some traders are willing to pay a higher price for volatility on different venues. However, the lack of meaningful liquidity and infrastructure issues are major challenges for large institutions to adopt weekend trading.
For now, perpetual futures remain in the domain of crypto-native firms, proprietary trading shops, and savvy retail traders. The emergence of perpetual markets is providing another source of information for traders to gauge market direction after the weekend, and may be influencing traditional markets. As the industry continues to evolve, it is likely that traditional finance will be influenced by crypto innovations, and the old routine of the 'weekend effect' may become a thing of the past.