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2020issue C0158

Building an equal-dollar futures liquidity screen

A listed-futures liquidity filter sizes every market to the same three-year dollar range, then ranks those equal-dollar books by open interest and a volume factor so executable depth is compared before a contract is selected.

  • Equal-dollar ranking multiplies contract value by the largest price change observed over the prior three years so every contracts-to-trade figure represents the same dollar profit potential.
  • Relative contract liquidity equals the equal-dollar contract count times total open interest times a volume factor, usually set between 1 and 4.
  • Contracts marked with one or zero activity dots are treated as thinly traded and harder to execute for speculative use.
  • Each column is a relative comparison only; a liquidity, margin, or equal-dollar figure is meaningful solely against other contracts in the same column.
Entries in this reading3 entries
Liquidity filter46 readingsOpen interest analysis46 readingsCurrent trackFutures contract selection51 readings

A screen before a contract is selected

The screen is built to compare per-contract dollar range against how easily the full open-interest book can be bought or sold before a contract is selected. A liquidity filter is a pre-trade screen that ranks listed futures by executable depth and implementation cost rather than by directional outlook.

Open interest is the stock of outstanding contracts used as a depth input when ranking how much of a market can be executed.

Equal-dollar contract counts

Equal-dollar ranking multiplies contract value by the largest price change observed over the prior three years so every contracts-to-trade figure represents the same dollar profit potential.

The equal-dollar contract count is the number of contracts of one market that must be traded so its three-year dollar range matches another market.

Contracts needed for the same three-year dollar range

Each bar is how many contracts of that market match the same three-year dollar profit. Equity-index and meal books need one or two contracts; Eurodollar and the Mexican peso need more than thirty. Figures are the Contracts to Trade for Equal Dollar Profit column from the January 2020 Trading Liquidity: Futures table, still in the source’s liquidity rank from most to least tradeable.
Each bar is how many contracts of that market match the same three-year dollar profit. Equity-index and meal books need one or two contracts; Eurodollar and the Mexican peso need more than thirty. Figures are the Contracts to Trade for Equal Dollar Profit column from the January 2020 Trading Liquidity: Futures table, still in the source’s liquidity rank from most to least tradeable.Listed commodity and financial futures · January 2020 TASC listing; three-year price range

The source sets every count from tick dollar value times the three-year maximum price excursion, so the bars are equal-dollar sizes, not raw lot counts. Relative liquidity (the original dot column) is a separate product of this count, open interest, and a volume factor and is not plotted.

Relative contract liquidity

A listed-futures liquidity rank can be constructed by multiplying contract point value, a three-year maximum price move, open interest, and a volume factor usually set between 1 and 4.

Relative contract liquidity is a comparative score of how easily a listed futures book can be bought or sold. It equals the equal-dollar contract count times total open interest times a volume factor.

The volume factor is a low-activity adjustment, typically between 1 and 4, taken as the greater of 1 and the exponential of the natural log of volume divided by the natural log of 5000, minus 2.

Effective percent margin and thin books

Effective percent margin equals dollar margin divided by the three-year dollar price range of the contract, then multiplied by 100. It is posted margin expressed as a percentage of that three-year dollar price range.

Contracts marked with one or zero activity dots are treated as thinly traded and harder to execute for speculative use.

Columns are relative only

Each column is a relative comparison only. A liquidity, margin, or equal-dollar figure is meaningful solely against other contracts in the same column.

For listed shares, period volume as a percentage of shares outstanding can serve as a turnover proxy for trading liquidity.

Educational research material, not investment advice. Historical source context does not establish present-day performance.
48 of 51 in the Futures contract selection track
202058-58 pp.Next on Futures contract selectionUse liquidity and open interest as a futures execution screenA liquidity filter is a keep-or-drop screen. On the rank display, a single mark or no mark is treated as little activity and as less suitable for speculative execution.
All readings on this track · 51 readings
  1. 2002Single-stock futures and the sleeve that belongs on the ticket
  2. 2007Ethanol futures liquidity lagged the policy boom
  3. 2010Relative liquidity ranking for futures contract selection
  4. 2010A liquidity filter for executable futures contract selection
  5. 2010Screening futures by liquidity, open interest, and equal-dollar size
  6. 2010Ranking futures liquidity for executable contract choice
  7. 2010Liquidity and open interest screens for futures selection
  8. 2010Ranking futures by open interest and equal-dollar liquidity
  9. 2011Liquidity filter for futures contract selection
  10. 2011Futures liquidity rank as an execution filter
  11. 2011Silver contract-selection by size, hours, and carry
  12. 2011Filtering futures by liquidity, open interest and equal-dollar size
  13. 2011Liquidity and open interest as a screen for futures selection
  14. 2011A futures liquidity filter for equal-dollar execution
  15. 2012Ranking futures liquidity before choosing a contract
  16. 2013Liquidity-first futures contract selection
  17. 2013Equal-dollar liquidity filter for futures contract choice
  18. 2013Futures liquidity filters for executable contract selection
  19. 2013Filter listed futures by liquidity and open interest first
  20. 2013Ranking listed futures by liquidity and equal-dollar size
  21. 2013A pre-trade liquidity filter for futures contract selection
  22. 2014Why commodity futures are trades, not long-horizon holdings
  23. 2014Rank futures liquidity before selecting the contract
  24. 2014Filter futures by equal-dollar liquidity and open interest
  25. 2015Filter futures contracts by liquidity and open interest
  26. 2015A two-stage liquidity filter for futures contract selection
  27. 2015Screen futures contracts by liquidity and open interest
  28. 2015Equal-dollar futures choice as a liquidity filter
  29. 2016Evaluate futures liquidity before contract selection
  30. 2016Ranking futures liquidity before you pick the contract
  31. 2016Filter listed futures by relative liquidity and open interest
  32. 2017Evaluating futures liquidity for executable contract selection
  33. 2017A relative liquidity rank for choosing an executable futures contract
  34. 2017Constructing a futures liquidity filter for contract selection
  35. 2017Filter futures by liquidity, open interest, and equal-dollar size
  36. 2017Rank futures liquidity before contract selection
  37. 2017Build a futures liquidity filter from open interest
  38. 2018Evaluating futures liquidity for executable contract choice
  39. 2018Volume-confirmed pivots versus unregulated spot exposure
  40. 2018Executable futures selection from a 2018 liquidity board
  41. 2018Evaluate futures liquidity before contract selection
  42. 2018Open-interest liquidity filter for futures contract selection
  43. 2018Construct a futures liquidity filter from open interest and range
  44. 2018Ranking futures by liquidity, open interest, and equal-dollar cost
  45. 2019Ranking futures liquidity before contract selection
  46. 2019Ranking futures liquidity before you pick a contract
  47. 2019Screening futures by equal-dollar liquidity
  48. 2020Building an equal-dollar futures liquidity screen
  49. 2020Use liquidity and open interest as a futures execution screen
  50. 2020Compact index futures as diversified contract selection
  51. 2020Filter futures by range-scaled liquidity and open interest
By fieldLiquidity and costs46 readingsBy year20207 readings
All 51 readings tagged Futures contract selection
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