By Friday afternoons, the atmosphere on commodity trading desks shifts. For the first four days of the week, traders focus on making profitable bets.
However, by lunchtime on Fridays, they start thinking about risk management until markets reopen on Sunday evenings. Anything can happen while markets are closed, and traders are left with no control over their positions. According to Mustafa Al Niama, former head of digital assets at Goldman Sachs, 'the desk basically stops thinking about making money and starts thinking about what they can live with for roughly forty-eight hours until the Sunday evening reopen.' Every commodities options trader is familiar with this ritual, where the focus is on whether they are comfortable with their position if something happens while markets are closed.
Terry Duffy, chairman and CEO of CME Group, notes that 'risk, geopolitical or not, does not know what day of the week it is.' However, markets still largely do, and traders have had to plan ahead for potential weekend catastrophes. Earlier this year, an unusual event in the oil options market disrupted this long-standing routine. As tensions escalated between Iran and Israel, oil-linked futures saw a sudden spike in volume over the weekend in March. Traders flocked to crypto exchanges to trade derivatives contracts called 'perpetual futures,' which run around the clock.
The total value of all 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 just a blip.
It highlighted the existence of a 24/7 venue for oil derivatives trading, while traditional finance is stuck offline. Researchers at Energy Aspects say the dynamics of how traders price short-dated West Texas Intermediate (WTI) crude options are set to change, thanks to the rapid growth of similar round-the-clock perpetuals on crypto exchanges. For years, the implied volatility of 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, with perpetual contracts available, traders can now hedge their options exposure through the weekend, which may lead to a change in the 'weekend effect' in short-dated WTI options.
In theory, this could create an opportunity for traders to capture profits over the weekend if the market becomes chaotic, rather than just sitting on their positions. 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 may not be keeping the markets open but keeping the financial system underneath everything open as well. Large institutions, such as banks, already have systems in place for the market's traditional operating hours, and they would need a different structure for weekend trading.
The volume of perps linked to traditional assets such as commodities and stocks has increased meaningfully over the past few months, but it's still relatively small from Wall Street's perspective. For now, perpetual contracts remain in the domain of crypto-native firms, proprietary trading shops, and savvy retail traders.
However, perps play an important role in giving traders a tool to gauge how the market will trade when it opens if news breaks out during the weekend. Before perps, it was mostly a guess of how an asset would trade once the traditional market opens. But now, because perps trade 24/7, traders at least have a better idea of the bets' direction after the weekend. Perhaps the biggest impact of perps thus far is that the instrument might be influencing how some traders behave.
Whether perps can actually reshape the traditional market remains uncertain, but there are signs that old habits are already beginning to change for traders. They will still spend the end of the week worrying about the weekend, but the difference is that if there are continuous trading hours, some of them may no longer have to spend time waiting.