Skip to main content
Track Futures contract selection
36 / 51
Search the archiveLibrary
Library

2017issue C1058

Rank futures liquidity before contract selection

Editorial view: rank listed futures by relative contract liquidity, open interest, and effective percent margin before comparing directional setups, so only contracts that can absorb size reach the shortlist.

  • A futures liquidity score multiplies contract point value, three-year maximum price motion, open interest, and a volume factor usually set between 1 and 4.
  • Relative liquidity ranking treats contracts with one or no activity marks as thinly traded and harder to execute.
  • Equal-dollar contract count puts every market on the same dollar-opportunity scale, while effective percent margin compares posted dollar margin with each contract’s three-year dollar price range.
  • Each liquidity and margin column is a proportional comparison that is meaningful only against other contracts in the same column.
Entries in this reading3 entries
Liquidity filter46 readingsOpen interest analysis46 readingsCurrent trackFutures contract selection51 readings

Start with an execution screen

TradersWeek editorial reading: treat futures-market choice as an execution screen first. Convert open interest, a volume-adjusted liquidity score, and margin stretch into a shortlist of contracts that can absorb size. Compare directional setups only after that filter.

The archive workflow scores how readily a futures market can be bought or sold, then uses outstanding contracts as a capacity check so a chosen futures month is sized to the book rather than to a chart pattern alone.

Build a relative liquidity score

A futures liquidity score multiplies contract point value, three-year maximum price motion, open interest, and a volume factor usually set between 1 and 4. That volume adjustment factor down-weights very thin or extremely heavy volume when scoring how executable a contract is.

Equal-dollar contract count equals tick dollar value times the three-year maximum price excursion. Every entry on that scale represents the same dollar opportunity. It is the number of contracts of one market needed to match another market’s three-year maximum dollar price excursion.

Relative contract liquidity is the descending score used to rank that executability. It equals the equal-dollar contract count times total open interest times a volume factor equal to the greater of 1 or the exponential of the natural log of volume divided by the natural log of 5000, minus 2.

Treat thin books as harder to execute

Relative liquidity is ranked so that contracts with one or no activity marks are treated as thinly traded and harder to execute. An open interest filter uses outstanding contracts as a capacity check, so the chosen month is sized to the book rather than to a chart pattern alone.

Compare margin stretch on the same scale

Effective percent margin equals dollar margin divided by the contract’s three-year dollar price range, then multiplied by one hundred. Posted dollar margin is thereby expressed so margin stretch can be compared across markets.

In the 2017 listing, the September S&P 500 E-mini needed two contracts for equal-dollar profit, showed a 3.8 percent margin and a 14.3 effective percent margin, and ranked first on relative liquidity.

Each liquidity and margin column is a proportional comparison that is meaningful only against other contracts in the same column.

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

Futures margin stretch by liquidity rank, October 2017

Contracts are ordered as the October 2017 liquidity table ranked them, from easiest to transact to thinnest. The primary bars are effective percent margin (posted margin dollars divided by the three-year dollar range of the contract); the reference bars are the posted percent margin on the same scale. Energy names high on the list consume little of their historical range as margin, while silver, cotton, corn, palladium, and spring wheat stretch margin much further — a screen to apply before any directional setup.
Contracts are ordered as the October 2017 liquidity table ranked them, from easiest to transact to thinnest. The primary bars are effective percent margin (posted margin dollars divided by the three-year dollar range of the contract); the reference bars are the posted percent margin on the same scale. Energy names high on the list consume little of their historical range as margin, while silver, cotton, corn, palladium, and spring wheat stretch margin much further — a screen to apply before any directional setup.US-listed commodity and financial futures, listed contract months · October 2017

Relative contract liquidity is printed in the source as a dot bar (contracts-to-trade times open interest times a volume factor) and is not a numeric column, so it is used only as sort order. Equal-dollar-profit weights use each contract’s three-year maximum price excursion.

Educational research material, not investment advice. Historical source context does not establish present-day performance.
36 of 51 in the Futures contract selection track
201758-58 pp.Next on Futures contract selectionBuild a futures liquidity filter from open interestEqual-dollar contract count is tick dollar value times the three-year maximum price excursion, so each listed future is scaled to the same dollar size.
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 year201710 readings
All 51 readings tagged Futures contract selection
Also on Futures contract selection5 readings
2007Ethanol futures liquidity lagged the policy boomLiquidity filter2010A liquidity filter for executable futures contract selectionLiquidity filter2010Liquidity and open interest screens for futures selectionLiquidity filter2010Ranking futures by open interest and equal-dollar liquidityOpen interest analysis2010Ranking futures liquidity for executable contract choiceLiquidity filter