Filter futures contracts by liquidity and implementation cost

What the screen decides

The archive workflow ranks futures contracts on liquidity and restates posted margin as an effective percent. Both results are filters. They keep or drop an order before it is sent.

A liquidity filter is a pass-or-fail screen that keeps only contracts whose activity and book can absorb an order over its life cycle. Open-interest analysis is a filter that treats outstanding contracts as evidence of how much size the market can absorb when ranking execution quality. Commission analysis is a filter that converts posted margin and related trading frictions into an implementation-cost comparison before the order is sent.

Drop names the book cannot absorb

A futures liquidity rank can be built by multiplying contract point value, a three-year maximum price move, open interest, and a volume factor. That volume factor is usually scaled from 1 to 4 when activity is unusually light or heavy.

Relative contract liquidity can also be stated as contracts-to-trade times total open interest times a volume factor. In that construction the volume factor is the greater of 1 and exp(ln(volume)/ln(5000)) minus 2.

The equal-dollar contract count equals tick dollar value times the three-year maximum price excursion, so every figure in that column represents the same dollar opportunity.

Treat outstanding contracts as absorbable size

Open interest enters both liquidity constructions. It is a multiplier in the point-value rank, and the alternative rank multiplies contracts-to-trade by total open interest and a volume factor.

Used this way, outstanding contracts are not a forecast of direction. They are evidence of how much size the market can absorb when execution quality is ranked.

Convert margin into an implementation-cost comparison

Effective percent margin equals dollar margin divided by the three-year range of contract dollar value, then multiplied by 100. That restatement sits inside commission analysis: posted margin and related trading frictions become a comparison before the order is sent.

TradersWeek editorial reading: treat the effective percent as a margin lock-up check on contracts that already passed the liquidity filter. A large lock-up relative to other names in the same column is a reason to treat the order as not executable on cost grounds.

Use share turnover as an equity liquidity proxy

Equity trading activity can be treated as a liquidity proxy by expressing period volume as a percentage of shares outstanding, which is a share turnover rate. That construction belongs to the same pass-or-fail liquidity idea, with turnover standing in for futures activity.