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 risk management, as they must tolerate potential market fluctuations until Sunday evening. The inability to adjust or rebalance bets over the weekend can be a source of anxiety, especially when holding positions tied to highly volatile markets.
According to Mustafa Al Niama, former head of digital assets at Goldman Sachs, 'From about lunchtime, 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.' This ritual is familiar to every commodities options trader, who must assess whether they are comfortable with their position if something unexpected 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 have traditionally been bound by weekday operating hours. Recently, an unusual event in the oil options market disrupted this long-standing routine. As tensions escalated between Iran and Israel, oil-linked futures experienced a sudden spike in volume over a weekend in March.
Instead of waiting for traditional markets to reopen, traders turned to crypto exchanges to trade perpetual futures contracts. The total value of 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 trading 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 changing the dynamics of the market.
Researchers at Energy Aspects note that the growth of perpetual futures on crypto exchanges is set to alter how traders price short-dated West Texas Intermediate (WTI) crude options. The implied volatility of WTI contracts, which had traditionally fallen on Fridays, is beginning to narrow.
Traders can now hedge their options exposure through the weekend, which may lead to increased demand for options and a reduction in the Friday discount. In theory, this could create new opportunities for traders to capture profits over the weekend. Energy Aspects estimates that the availability of continuous futures contracts could create approximately 40% more hedging sessions over the life of a typical contract. The rise of perpetual futures is also influencing traditional markets, with traders using them as a tool to gauge market direction after the weekend.
Hein Tibosch, head of digital assets OTC and product at Flow Traders, notes that perpetual markets have become an important source of information before traditional markets reopen. The trader at the proprietary market-making firm describes a similar shift, stating that 'It's not really a surprise anymore by Sunday's open,' as traders increasingly watch crypto markets throughout the weekend to anticipate traditional futures prices. This might be the first sign that perpetual futures are starting to influence traditional markets, not as a replacement, but as an additional source of price discovery.
The impact of perpetual futures on traditional markets remains uncertain, with volumes still modest and big-money institutions cautiously watching. However, there are signs that old habits are changing, and some traders are beginning to adapt to the new reality of continuous trading hours.
As Flow Traders' Tibosch notes, 'For lots of players, for example, a hedge fund or quant shop, if you can just have your strategies run instead of five days a week, seven days a week, that's two extra days of trading.' The future of trading may be 24/7, and it is time for trading desks to prepare for an around-the-clock market, leaving behind the traditional weekend effect.