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.
However, by Friday lunchtime, their attention turns to managing risk until markets reopen on Sunday evenings. The 48-hour period can be daunting when holding positions tied to highly traded markets, with no ability to adjust or rebalance bets until trading resumes. According to Mustafa Al Niama, former head of digital assets at Goldman Sachs, 'From about lunchtime, the desk stops thinking about making money and starts thinking about what they can live with for roughly 48 hours until the Sunday evening reopen.' Every commodities options trader is familiar with this ritual, where the question by the end of the week is not about the commodity's direction but whether they are comfortable with their position if something unforeseen happens while markets are closed. Terry Duffy, chairman and CEO of CME Group, notes, 'Risk, geopolitical or not, does not know what day of the week it is.' Yet, markets still largely operate on a traditional schedule.
For decades, traders have had to plan ahead for potential weekend and after-hours crises as part of their job. However, an unusual event in the oil options market earlier this year disrupted this long-standing routine. As tensions escalated between Iran and Israel, traders flocked to crypto exchanges over the weekend to trade 'perpetual futures,' which operate around the clock. The total value of active contracts on the decentralized exchange Hyperliquid hit 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, contrasting with traditional finance's limited hours. Martin Lee, market insights lead at DWF Labs, observed, 'We're roughly seeing 2-3x more volume on average on weekdays vs weekends for oil perps on Hyperliquid over the last 3 months.' Despite activity cooling after the spike following the Iran conflict, weekend trading's share of overall volume has grown by roughly 25% since March. Researchers at Energy Aspects note that the dynamics of pricing short-dated West Texas Intermediate (WTI) 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 they couldn't manage over the weekend. This discount has begun to narrow, according to Energy Aspects.
If traders can hedge options exposure through perpetual futures over the weekend, they may be willing to hold or buy options they previously would have sold before Friday's close. In theory, this creates an opportunity for traders to capture profits over the weekend if the market becomes chaotic. Energy Aspects estimates that continuous futures contracts could create roughly 40% more hedging sessions over the life of a typical contract.
The availability of perpetual contracts allows traders to gauge how the market will trade when it opens if news breaks out during the weekend. Before perps, it was mostly a guess; now, traders have a better idea of the bets' direction after the weekend. Hein Tibosch, head of digital assets OTC and product at Flow Traders, said perpetual markets have become another source of information before traditional markets reopen. The biggest impact of perps might be influencing how some traders behave, with the potential for traditional finance to be influenced by crypto innovations.
Whether perps can reshape the traditional market remains uncertain, with volumes still modest and big-money institutions cautiously watching. However, there are signs that old habits are changing for traders, who may no longer have to spend time waiting on Fridays but can start making money by trading or tracking these contracts.