By Friday afternoons, commodity trading desks undergo a significant shift in focus. For the first four days of the week, traders concentrate on making profitable bets, but as the weekend approaches, their attention turns to risk management. With the possibility of unexpected events such as wars, election results, or surprise announcements, traders must carefully assess their positions before the markets close. 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.' This ritual is familiar to every commodities options trader, who must weigh the risks of holding a position over the weekend when markets are closed.
However, the rise of perpetual futures contracts on crypto exchanges has introduced a new dynamic, allowing traders to hedge their bets around the clock. This development has significant implications for the traditional 'weekend effect' in short-dated WTI options, where implied volatility is typically depressed on Fridays.
With the availability of perpetual contracts, traders may be more willing to hold or buy options over the weekend, potentially capturing profits in the event of market chaos. While the impact of this shift is still uncertain, it is clear that the emergence of 24/7 trading is changing the way Wall Street approaches the weekend.