Skip to main content
Track Futures contract selection
51 / 51
Search the archiveLibrary
Library

2020issue C1058

Filter futures by range-scaled liquidity and open interest

A futures liquidity rank scales each listed market to a comparable dollar move, then multiplies that size by open interest and a volume factor. Names with one liquidity mark or none are treated as having little activity.

  • An equal-dollar contract count scales every listed future to a comparable three-year dollar move before any liquidity rank is formed.
  • Relative contract liquidity multiplies that scaled count by open interest and a volume factor, then orders markets from easiest to hardest to buy and sell.
  • Markets shown with one liquidity mark or none are treated as having little activity on this ranking.
  • Effective percent margin expresses initial margin dollars as a percentage of the contract’s own three-year dollar price range.
Entries in this reading3 entries
Liquidity filter46 readingsOpen interest analysis46 readingsCurrent trackFutures contract selection51 readings

Put listed futures on an equal-dollar scale

The archive workflow starts by putting every listed future on an equal-dollar footing. An equal-dollar contract count is defined as tick dollar value times the three-year maximum price excursion, so each listed market is scaled to a comparable dollar move.

That scaled size is contracts to trade: the number of contracts needed so one market’s multi-year maximum dollar excursion matches another’s, making listed names comparable on an equal-dollar basis. In the 2020 listing, some equity-index contracts needed 1 or 2 contracts for the equal-dollar scale while canola needed 114, so the same dollar excursion implies very different order size across names.

Form a relative liquidity rank

A futures liquidity rank can be formed by multiplying contract point value, a three-year maximum price motion, open interest, and a volume adjustment usually set between 1 and 4. Relative contract liquidity is the equal-dollar contract count times total open interest times a volume factor, ordered from easiest to hardest to buy and sell.

Open interest enters as the stock of outstanding futures positions used as a capacity input. The volume factor is a multiplier applied so unusually thin or heavy volume does not dominate the comparison. It is the greater of 1 and the exponential of the natural log of volume divided by the natural log of 5000, minus 2.

Treat thin ranks as inactive

Markets shown with one liquidity mark or none are treated as having little activity on this ranking. The liquidity filter is the execution screen that discards contracts too inactive to absorb a planned, range-scaled size.

Measure margin against the three-year range

Effective percent margin equals margin dollars divided by the three-year dollar price range of the contract, then multiplied by one hundred. It expresses initial margin dollars as a percentage of that three-year dollar price range, so capital locked can be compared per unit of historical range.

Posted margin versus three-year-range effective margin

Posted percent margin and the same dollars measured against each contract’s three-year dollar range tell different stories. Bitcoin, yen, the Mexican peso, and coffee consume the most of that range; soybean meal, fed funds, and the two-year note consume the least. Every figure is taken from the October 2020 Trading Liquidity: Futures table, not estimated from the page art.
Posted percent margin and the same dollars measured against each contract’s three-year dollar range tell different stories. Bitcoin, yen, the Mexican peso, and coffee consume the most of that range; soybean meal, fed funds, and the two-year note consume the least. Every figure is taken from the October 2020 Trading Liquidity: Futures table, not estimated from the page art.US-listed commodity and financial futures · October 2020 listings · 2017-01-01T00:00:00.000Z to 2020-12-31T00:00:00.000Z

Effective percent margin is margin value divided by the three-year price range of contract dollar value, times 100. Posted percent margin is margin relative to contract value. Relative-liquidity dots on the same table are a visual index, not a stated numeric series, so they are omitted.

A turnover proxy for listed shares

For listed shares, period volume as a percentage of shares outstanding is offered as a turnover-rate proxy for trading liquidity.

Educational research material, not investment advice. Historical source context does not establish present-day performance.
51 of 51 in the Futures contract selection track
1998Track finished · Next track: Kalman filterT3 adaptive smoothing from regression benchmarks10 readings
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
Also on Futures contract selection5 readings
2007Ethanol futures liquidity lagged the policy boomOpen interest analysis2010A liquidity filter for executable futures contract selectionOpen interest analysis2010Liquidity and open interest screens for futures selectionOpen interest analysis2010Ranking futures by open interest and equal-dollar liquidityLiquidity filter2010Ranking futures liquidity for executable contract choiceLiquidity filter