Traditionally, commodity traders have spent their Fridays assessing risk and adjusting their positions in anticipation of the weekend, when markets are closed. However, with the rise of crypto exchanges offering perpetual futures contracts, traders can now react to market developments in real-time, 24/7. This shift has significant implications for the oil derivatives market, where traders can hedge their exposure over the weekend using perpetual futures. Researchers at Energy Aspects note that the dynamics of short-dated West Texas Intermediate crude options are set to change, with the implied volatility discount narrowing as traders can now hedge their positions over the weekend.
While institutional traders have been slow to adopt perpetual futures due to liquidity concerns and infrastructure limitations, crypto-native firms, proprietary trading shops, and savvy retail traders are already leveraging these instruments. The growth of perpetual futures trading may ultimately influence traditional markets, providing an additional source of price discovery and altering the way traders behave on Fridays.
As the market continues to evolve, it is likely that trading desks will need to adapt to a 24/7 environment, abandoning the traditional 'weekend effect' and embracing new opportunities for profit.