The mood on commodity trading desks typically shifts by Friday afternoon, as traders begin to focus on managing risk rather than making new trades. However, with the emergence of crypto markets, traders can now hedge their positions over the weekend, potentially changing the dynamics of the oil market. Researchers at Energy Aspects note that the implied volatility of West Texas Intermediate crude options has begun to narrow, as traders can now use perpetual contracts to hedge their exposure.
While institutional traders have yet to fully embrace perpetual contracts, the growth of crypto markets is likely to continue influencing traditional finance. The availability of 24/7 trading venues is creating new opportunities for traders to capture profits over the weekend, and the traditional 'weekend effect' may become a thing of the past. As one trader noted, 'You have more touch points for picking up and laying off risk over the weekend than you had before.' The shift towards continuous trading is likely to have significant implications for the financial industry, and traders are advised to prepare for an around-the-clock market.