The traditional Friday afternoon ritual of commodity trading desks is changing, as traders are no longer limited by the constraints of weekday trading hours. With the advent of perpetual futures contracts, traders can now hedge their positions and make trades over the weekend, reducing their exposure to risk and increasing their potential for profit.
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.' The growth of crypto exchanges has enabled traders to access markets 24/7, and the volume of perpetual futures contracts has increased significantly in recent months. Researchers at Energy Aspects believe that this development will change the dynamics of how traders price short-dated West Texas Intermediate crude options, as they can now hedge their exposure over the weekend. The availability of perpetual contracts has also created new opportunities for traders to capture profits over the weekend, rather than simply sitting on their positions. While some traders are cautious about the impact of perpetual futures, others see it as a game-changer for the industry.
As Terry Duffy, chairman and CEO of CME Group, noted, 'Risk, geopolitical or not, does not know what day of the week it is.' The rise of perpetual futures contracts is likely to have a significant impact on traditional finance, as it challenges the long-standing assumption that weekends are a time for waiting. With the potential for 24/7 trading, traders may no longer have to spend time waiting for markets to reopen, and can instead focus on making money or tracking contracts.
As Hein Tibosch, head of digital assets OTC and product at Flow Traders, said, 'The perps... will be a pretty good indicator of where the market is heading.' The future of trading is likely to be shaped by the growth of perpetual futures contracts, and traditional finance will need to adapt to the new reality of around-the-clock markets.