The traditional Friday afternoon mindset on commodity trading desks is undergoing a significant shift. As the week draws to a close, traders are no longer solely focused on managing risk until markets reopen on Sunday evening.
Instead, they can now leverage perpetual futures contracts, also known as 'perps,' to hedge their positions over the weekend. This development has far-reaching implications for the trading landscape, particularly in the oil derivatives market. The availability of perps on crypto exchanges has created a 24/7 venue for trading, allowing traders to respond to market-moving events in real-time, rather than waiting for traditional markets to reopen. Researchers at Energy Aspects note that this shift is likely to alter the dynamics of short-dated West Texas Intermediate (WTI) crude options, as traders can now hedge their exposure over the weekend.
The growth of perps trading has also led to an increase in weekend trading volume, with some exchanges reporting record-breaking numbers. While institutional traders have yet to fully embrace perps, the potential for 24/7 trading is beginning to influence traditional markets, with some traders using perps to gauge market direction before traditional markets open.
The rise of perps may ultimately reshape the traditional market, as traders adapt to a new reality where markets are always open, and the concept of a 'weekend effect' becomes a thing of the past.