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2015issue C0162-64

Equal-dollar futures size and open-interest liquidity

Editorial. Read the archive as a two-gate pre-trade checklist: convert every futures name into an equal-dollar contract count from a three-year price range, then use an open-interest-weighted liquidity rank to accept or reject that size before the order is sent.

  • Futures can be placed on an equal-dollar-profit scale by multiplying contract value by the largest price change observed over the prior three years, so each resulting contract count represents the same dollar value.
  • Relative contract liquidity is ordered by multiplying the equal-dollar contract count by total open interest and by a volume factor that is usually set between 1 and 4.
  • Effective percent margin equals the dollar margin divided by the contract's three-year dollar price range, then multiplied by 100.
  • Each comparison column is a proportional measure and is meaningful only relative to other contracts in that same column.
Entries in this reading3 entries
Volatility position sizing14 readingsCurrent trackFixed contract sizing29 readingsOpen interest analysis118 readings

Equal-dollar contract counts

Futures can be placed on an equal-dollar-profit scale by multiplying contract value by the largest price change observed over the prior three years, so each resulting contract count represents the same dollar value.

The equal-dollar contract count equals the tick's dollar value multiplied by the three-year maximum price excursion. It is how many contracts of one future match another future's three-year dollar price excursion.

Effective percent margin

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

Relative contract liquidity

A futures liquidity ranking can be built by multiplying contract point value, a three-year maximum price motion, open interest, and a volume factor that is usually set between 1 and 4.

Relative contract liquidity can be ordered by multiplying the equal-dollar contract count by total open interest and by a volume factor. That construction is a descending rank built from equal-dollar size, total open interest, and a volume factor.

The volume factor is the greater of 1 and the exponential of the natural log of volume divided by the natural log of 5,000, minus 2. It is a floor-at-one scaler based on how far volume sits above a 5,000-contract logarithmic baseline.

Each comparison column is a proportional measure and is meaningful only relative to other contracts in that same column.

Illustrated equal-dollar counts

In the illustrated ranking, 5 E-mini S&P 500 contracts, 163 two-year Treasury-note contracts, and 196 Eurodollar contracts were the counts required for equal dollar profit.

A share-turnover proxy

For listed shares, period volume as a percentage of shares outstanding was treated as a turnover-rate proxy for trading liquidity. That share-turnover proxy is period volume divided by shares outstanding, used as a stand-in for equity trading liquidity.

Equal-dollar futures contract counts

Each bar is how many contracts of that futures name must be traded to take the same dollar profit potential as the others. Full-size S&P 500 and Nasdaq 100 sit at one lot; Eurodollar and the two-year note jump to 196 and 163. Figures come from the January 2015 Trading Liquidity: Futures table, which equalizes every listing by tick value times the three-year maximum price excursion.
Each bar is how many contracts of that futures name must be traded to take the same dollar profit potential as the others. Full-size S&P 500 and Nasdaq 100 sit at one lot; Eurodollar and the two-year note jump to 196 and 163. Figures come from the January 2015 Trading Liquidity: Futures table, which equalizes every listing by tick value times the three-year maximum price excursion.U.S. listed commodity and financial futures · January 2015 snapshot, three-year price range

Rows stay in the magazine's relative-liquidity order (these counts times open interest times a volume factor). Liquidity itself is printed only as dots, so it is not plotted.

Educational research material, not investment advice. Historical source context does not establish present-day performance.
16 of 21 in the Fixed contract sizing track
201538-42 pp.Next on Fixed contract sizingAtomize trading decisions: discipline over complexityWhen traders feel confused they often shorten the chart, instead of stepping back to a slower timeframe to judge the broader market tide.
All readings on this track · 21 readings
  1. 1987Volatility-layered mechanical system with fixed contracts
  2. 1994Starting capital from worst-case portfolio walk-forwards
  3. 1994Bound small-account risk before adding leverage
  4. 1996Variable position size after entry
  5. 1996Equity path filters for contract size and drawdown
  6. 1997Stop distance, equity caps, and trading halts
  7. 1999Size-matched buy-and-hold evaluation for stock systems
  8. 2002Size from stop distance to keep dollar risk even
  9. 2003Share size from daily profit equilibrium
  10. 2004Half-size energy futures as a pre-trade leverage filter
  11. 2007Equalizing contract risk in trend following
  12. 2007Expected-equity sizing and geometric drag
  13. 2007Predefine the loss before fixed contract sizing
  14. 2013Weekday, session, and market expectancy for contract size
  15. 2014Bounded leverage before you size a trade
  16. 2015Equal-dollar futures size and open-interest liquidity
  17. 2015Atomize trading decisions: discipline over complexity
  18. 2017Tiny bets, ruin risk, and mechanical scale
  19. 2018Near-strike weekly puts and unfunded assignment risk
  20. 2019Paper trading is unfinished without fill and size rules
  21. 2019Constructing futures leverage from margin and fixed size
By fieldSizing and leverage42 readingsBy year201585 readings
All 29 readings tagged Fixed contract sizing
Also on Fixed contract sizing5 readings
1987Volatility-layered mechanical system with fixed contractsVolatility position sizing1996Equity path filters for contract size and drawdownVolatility position sizing1996Variable position size after entryVolatility position sizing1997Stop distance, equity caps, and trading haltsVolatility position sizing2002Size from stop distance to keep dollar risk evenVolatility position sizing