The traditional Friday afternoon mindset on commodity trading desks is undergoing a significant shift. For the first four days of the week, traders focus on profiting from their bets, but by Friday lunchtime, their attention turns to managing risk until markets reopen on Sunday evening.
However, with the emergence of crypto exchanges offering perpetual futures contracts, traders can now hedge their positions and react to market changes over the weekend. This development has implications for the 'weekend effect' in short-dated West Texas Intermediate (WTI) options, where implied volatility is typically depressed on Fridays.
Researchers at Energy Aspects note that the availability of perpetual contracts allows traders to hedge their exposure over the weekend, potentially reducing the Friday selling pressure. While institutional traders have yet to fully embrace perpetual futures, the growth of crypto exchanges and the increasing volume of perps trading are quietly influencing the oil market. The ability to trade 24/7 is also changing how traders gauge market direction after the weekend, with perpetual markets becoming an additional source of information before traditional markets reopen.
As the crypto industry continues to innovate, it may be one of the first areas where traditional finance is influenced by crypto developments, potentially paving the way for a 24/7 trading environment.