A liquidity filter for executable futures contract selection

Read the ranking as a liquidity filter

A futures liquidity ranking can be read as a filter for executable contracts rather than as a forecast of direction. Relative contract liquidity is a ranking of how readily a listed futures market can be bought and sold. It combines size-adjusted opportunity, open interest, and a volume factor.

The liquidity filter keeps only contracts whose activity and capacity make an order executable after implementation cost. Open interest is the stock of outstanding futures contracts and is used as a capacity input when judging whether a market can absorb an order.

How relative contract liquidity is constructed

Relative contract liquidity is constructed from the contracts needed for equal dollar profit, total open interest, and a volume factor.

The contracts-to-trade figure scales markets to a common dollar-move basis using tick dollar value and a three-year maximum price excursion. That figure is the number of contracts of one futures market needed to match another market's dollar-scaled potential move, so comparisons are not distorted by contract size.

The volume factor is an adjustment that down-weights thin trading activity so low-volume contracts rank as harder to execute. It is the greater of one and an exponential transform of volume relative to a 5000-contract baseline, so thin books are penalized.

Compare marks and columns, not isolated values

Column values are proportional and are meaningful only when compared with other contracts in the same column. Contracts with the densest liquidity marks sit at the easy-to-trade end of the ranking. Contracts with one mark or none sit at the hard-to-trade end.

Margin efficiency and selection after the screen

Effective percent margin divides posted margin by the three-year dollar range of the contract so margin efficiency can be compared across markets. It expresses margin as a share of the contract's historically observed dollar price range and is used to compare how efficiently posted margin covers a typical move.

Selecting a futures contract after this screen jointly accounts for implementation ease, open-interest capacity, and how many contracts are needed to hold comparable economic size. Futures contract selection is the choice among listed futures after placing each contract in a comparable size, margin, and liquidity context.