By the end of the week, traders typically shift their focus from making money to managing risk, as they cannot adjust their positions until markets reopen on Sunday evening. However, with the rise of crypto exchanges offering perpetual futures contracts, traders can now trade derivatives around the clock, even on weekends. This development has significant implications for the traditional 'weekend effect' in short-dated WTI options, where implied volatility is typically depressed on Fridays.
As perpetual contracts become more widely available, traders may be willing to hold or buy options they previously would have sold before Friday's close, potentially creating new opportunities for profit. While institutional traders have been slow to adopt perpetual futures due to liquidity concerns and infrastructure limitations, the growth of crypto-native firms, proprietary trading shops, and savvy retail traders is driving the market forward. The increasing popularity of perpetual futures is also providing traders with a tool to gauge market direction after the weekend, reducing the uncertainty and guesswork that previously characterized weekend trading. As the market continues to evolve, it is likely that traditional finance will be influenced by crypto innovations, and the old routine of the 'weekend effect' may become a thing of the past.