Liquidity and open interest screens for futures selection

A filter before the book

A liquidity filter is a pre-trade screen that keeps only futures whose activity, cost, and size profile make an order realistically executable. Markets that fail that test never reach the later comparison.

Open interest analysis uses outstanding contracts as a scale factor so markets with more unclosed positions rank as easier to enter and exit.

How relative contract liquidity is built

A futures liquidity ranking can be built by multiplying contract point value, the largest price move observed over three years, open interest, and a volume adjustment that is usually between 1 and 4.

Relative contract liquidity is the equal-dollar contract count times total open interest times a volume factor. It is a cross-market score from those three inputs, and higher scores mark easier two-way trading.

The volume factor

The volume factor is a multiplier that lifts or floors the liquidity score when traded volume sits far from a 5000-contract reference level.

That volume factor is the greater of 1 and the exponential of the natural log of volume divided by the natural log of 5000, minus 2.

Equal-dollar contract count

The equal-dollar contract count is how many contracts of one future match another future's three-year dollar range, so opportunity is compared on the same money base.

The number of contracts needed for equal dollar profit equals tick dollar value times the three-year maximum price excursion, so every entry in that comparison shares the same dollar scale.

Effective percent margin

Effective percent margin equals margin dollars divided by the contract's three-year dollar price range, then multiplied by 100. It is initial margin expressed as a share of that range, used to compare capital intensity across markets.

How to read the ranking

Markets at the top of a relative-liquidity ranking are the easiest to buy and sell. Markets at the bottom are the hardest, and a single activity mark or none signals thin trading.

Liquidity and equal-dollar columns are proportional measures and are informative only when one futures contract is compared with others in the same column.

Selecting among the survivors

Futures contract selection is choosing among listed futures after liquidity and dollar size have been normalized, so one market can sit in a comparable book with others.

A share-turnover analogue

In listed shares, period volume as a percentage of shares outstanding can serve as a turnover-based proxy for trading liquidity. Share turnover is the equity-market analogue of futures activity: period volume as a fraction of shares outstanding.