The traditional Friday afternoon mood on commodity trading desks is undergoing a significant shift. For years, traders have been conditioned to wind down by lunchtime on Fridays, as they would have to wait until Sunday evening for markets to reopen. However, with the rise of perpetual futures in crypto markets, traders can now hedge their positions and react to market movements over the weekend.
This development has significant implications for the 'weekend effect' in short-dated WTI options, where implied volatility is typically depressed on Fridays due to traders liquidating positions they cannot hedge over the market closure. With perpetual contracts available, traders may be willing to hold or even buy options they previously would have sold before Friday's close, potentially creating new opportunities for profit.
While institutional traders are still cautious about entering the perpetual futures market due to liquidity concerns and infrastructure issues, the growth of crypto-native firms, proprietary trading shops, and savvy retail traders is driving the adoption of these instruments. As the market continues to evolve, it is likely that traditional finance will need to adapt to a 24/7 trading environment, where the old routine of waiting for markets to reopen on Mondays becomes a thing of the past.