Rank listed futures by liquidity before a forecast chooses the name

A pre-trade screen, not a forecast

A liquidity filter is a pre-trade screen that ranks listed futures by how readily a position can be entered and exited. It uses activity marks rather than a price forecast. Relative contract liquidity is the equal-dollar contract count multiplied by total open interest multiplied by a volume factor. Names at the top of that list are treated as easier to trade than names at the bottom.

A relative liquidity ranking can be built by multiplying contract point value, the largest price move observed over a three-year lookback, open interest, and a volume adjustment that is usually set between 1 and 4. One activity mark or none is treated as evidence of little trading activity and therefore as a weak liquidity-filter outcome for speculative order flow.

Open interest and volume confirmation

Open-interest analysis reads outstanding positions as a capacity input. Open interest is multiplied into the liquidity score so a contract with a thin book cannot rank as executable.

Volume confirmation applies a volume adjustment to the same ranking so that open interest is not trusted unless recent trading activity supports it. The volume factor is a scalar, usually between 1 and 4. It is the greater of 1 and the exponential of the natural logarithm of volume divided by the natural logarithm of 5000, then reduced by 2.

Implementation-cost controls after the ranking

The number of contracts required for a comparable dollar outcome equals tick dollar value times the three-year maximum price excursion, so every figure in that column shares the same dollar scale. That contracts-to-trade count is the number of contracts of one futures name required to match another name on the same three-year dollar price-range scale.

Effective percent margin is the dollar margin divided by the three-year range of contract dollar value, then multiplied by 100. It is used to compare capital locked per unit of historical range. Percent margin and effective percent margin are supplied so that the same posted capital can be compared across contracts after the liquidity ranking is known.

Share turnover on listed stocks

In listed stocks, period volume divided by shares outstanding is presented as a turnover-rate proxy for trading liquidity. Share turnover is that period volume expressed as a percentage of shares outstanding.