2013issue C0560

Filter futures by liquidity, open interest, and effective margin

A futures market is kept only when a liquidity filter, open-interest analysis, and commission analysis show that activity, standing size, and range-adjusted capital cost make an order completable. Survivors are then compared with relative-contract-liquidity, equal-dollar-contract-count, and effective-percent-margin.

Run a liquidity filter, open-interest analysis, and commission analysis before comparing futures listings, and keep a market only when activity, standing size, and range-adjusted capital cost make an order completable.
Relative-contract-liquidity multiplies contract point value by the largest three-year price move, then by open interest and a volume adjustment usually set between 1 and 4. The same score is equal-dollar-contract-count times total open interest times a volume-factor.
Equal-dollar-contract-count is formed from tick dollar value times the three-year maximum price excursion so listings share the same dollar potential instead of being compared on a raw one-lot basis.
Effective-percent-margin is posted margin dollars divided by the three-year dollar range, then multiplied by 100, and is shown beside raw percent margin so capital is not committed to a market that is expensive to hold or exit.

Entries in this reading3 entries

Current trackCommission analysis37 readings Liquidity filter118 readings Open interest analysis118 readings

Contract selection as an execution gate

Editorial note: TradersWeek treats contract selection as a pre-trade execution gate. Run the liquidity filter, open-interest analysis, and commission analysis first. Keep a market only when size, activity, and range-adjusted capital cost make an order completable, then compare the survivors on equal-dollar footing. That reading is editorial and is not attributed to the archive.

The archive workflow is a keep-or-drop screen, not a chart-pattern rule. The liquidity filter ranks whether a futures order is executable from activity, standing size, and implementation cost. Open-interest analysis uses outstanding contracts, with volume and historical range, to judge whether the book can absorb the intended trade. Commission analysis places posted margin and range-adjusted margin beside trading friction so capital is not committed to a market that is expensive to hold or exit.

How relative-contract-liquidity is ranked

Relative-contract-liquidity is a cross-market rank of how readily a futures book can absorb orders. It is built from contract value, multi-year range, open interest, and a volume adjustment.

One construction multiplies contract point value by the largest price move inferred from the prior three years, then by open interest and a volume adjustment usually set between 1 and 4. The same relative-liquidity score is also defined as the equal-dollar-contract-count times total open interest times a volume-factor.

Open-interest analysis and the volume-factor

Open-interest analysis is the size check inside that rank. Outstanding contracts enter the score with volume and the historical range so a book is judged by whether it can absorb the intended trade.

The volume-factor is a multiplier, floored at one, that adjusts the rank for unusually thin or heavy volume relative to a 5,000-contract reference. It is the greater of 1 and the exponential of the natural log of volume divided by the natural log of 5,000, minus 2.

Equal-dollar-contract-count

Equal-dollar-contract-count is the number of contracts that equalizes multi-year dollar range across markets so listings are not compared on a raw one-lot basis.

Those counts are formed from tick dollar value times the three-year maximum price excursion so every listing in that column represents the same dollar potential.

Commission analysis and effective-percent-margin

Commission analysis sits beside the size and activity screens. Effective-percent-margin is posted margin dollars expressed as a percentage of the contract's three-year dollar price range.

It equals posted margin dollars divided by the three-year dollar range of the contract, then multiplied by 100, and is shown beside raw percent margin for capital-efficiency comparison. Posted margin and that range-adjusted figure are read with trading friction so capital is not committed to a market that is expensive to hold or exit.

Activity marks and how to read each column

Activity marks are comparative only. The densest set signals the most trading. One mark or none signals thin activity treated as less suitable for speculative order flow.

Each column is a proportional measure that is meaningful only against other entries in that same column, not as a standalone absolute score.

In listed equities, share-turnover plays an analogous role. Share-turnover is equity volume over a period divided by shares outstanding, used as a liquidity proxy analogous to futures activity.

Period volume as a percentage of shares outstanding is treated as a turnover-rate proxy for trading liquidity and is described as affecting how readily price can change.

Educational research material, not investment advice. Historical source context does not establish present-day performance.

14 of 32 in the Commission analysis track

201415-15 pp.Next on Commission analysisBook futures data fees as implementation costNewly opened nonprofessional accounts were charged about 3 to 15 dollars per month for live-data access on electronic platforms, while orders sent through a full-service broker or trade desk were not billed that charge.

All readings on this track · 32 readings

By fieldLiquidity and costs119 readings By year201398 readings

All 37 readings tagged Commission analysis

Also on Commission analysis5 readings

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