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Weekend risk

The gap risk specific to holding through a non-trading period, when news accumulates for 48 hours or more with no way to react.

Weekend risk is gap risk with a longer fuse. Two full days of headlines - geopolitics, regulatory action, corporate announcements, crypto contagion - land on a market that cannot price them until Monday's open.

It is asymmetric by instrument. Crypto trades continuously and so has no weekend gap, though it has thinner weekend liquidity and more violent moves. Equity index futures reopen Sunday evening, so the exposed window is shorter than for cash equities. Single-stock positions carry the longest gap and the most name-specific headline risk.

The practical handling is a policy, not a case-by-case decision: either you carry weekend positions at reduced size with a defined worst case, or you do not carry them. Deciding on Friday afternoon while looking at an open profit is the version that goes wrong.

Related: gap-risk, overnight-exposure, overnight-exposure-limit, worst-case-loss

See it drawn

Original diagrams for the ideas on this page. Illustrative, not real market data.

Contango and backwardationTwo futures curves against contract expiry: one rising above spot, one falling below it.The same commodity, priced for delivery at different dates.78.0076.0074.0072.0070.00Futures pricespot+1m+2m+3m+4m+5m+6mMonths until the contract expiresspot price74.00CONTANGOlater contracts cost more than spotBACKWARDATIONlater contracts cost less than spot
Contango and backwardation. A futures curve shows what buyers will pay for delivery in one month, two months and so on. When later contracts cost more than the spot price the curve is in contango; when they cost less it is in backwardation.

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