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. With the rise of perpetual futures contracts, also known as 'perpetuals' or 'perps,' traders can now hedge their positions and make trades over the weekend, eliminating the need for a prolonged waiting period. 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 new paradigm is altering the way traders approach risk management and position sizing, particularly in the oil options market.
The availability of perps has created a 24/7 venue for oil derivatives trading, allowing traders to react to market developments in real-time, rather than waiting for traditional markets to reopen. As a result, the 'weekend effect' – where implied volatility for short-dated West Texas Intermediate (WTI) crude options tends to fall on Fridays – is beginning to narrow. Researchers at Energy Aspects believe that the growth of perps on crypto exchanges is changing the dynamics of how traders price WTI contracts, enabling them to hedge their exposure over the weekend.
While institutional traders have yet to fully embrace perps due to liquidity concerns and infrastructure limitations, the rise of crypto-native firms, proprietary trading shops, and savvy retail traders is driving adoption. The impact of perps on traditional markets remains uncertain, but they are increasingly being used as a tool for price discovery and gauging market direction over the weekend. As the lines between traditional finance and crypto continue to blur, it is likely that the concept of a 'weekend' in trading will become less relevant, paving the way for a 24/7 market.