The traditional Friday afternoon mood on commodity trading desks is changing. With the rise of crypto markets, traders can now react to market developments over the weekend, rather than waiting for traditional markets to reopen.
This shift is being driven by the growth of perpetual futures contracts, which allow traders to hedge their positions 24/7. As a result, the traditional 'weekend effect' in short-dated WTI options, where implied volatility is structurally depressed on Fridays, is beginning to narrow.
Traders can now capture profits over the weekend if the market becomes chaotic, rather than just sitting on their positions. However, the lack of meaningful liquidity and infrastructure issues are still major barriers to institutional traders adopting perpetual futures contracts.
Despite these challenges, the growth of perpetual futures contracts is likely to continue, and may eventually influence traditional markets. The ability to trade 24/7 is also providing traders with a new tool to gauge how the market will trade when it opens after the weekend, and may eventually lead to a shift towards 24/7 trading in all markets.