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2010issue C0393

Relative liquidity ranking for futures contract selection

Relative contract liquidity orders listed futures from easiest to hardest to transact by combining a contracts-to-trade count, open interest, and a volume factor. A liquidity filter keeps only names that can support the intended size. Survivors are then compared on an equal-dollar column and on effective percent margin so activity, capacity, and capital use sit on one grid.

  • A liquidity filter keeps only listed futures whose activity, open interest, and size-adjusted rank can support the intended order.
  • An equal-dollar column weights each future by contract value times the largest three-year price change, so every entry represents the same dollar amount.
  • Relative contract liquidity multiplies the contracts-to-trade count by total open interest and a volume factor, then ranks markets from easiest to hardest to transact.
  • Effective percent margin divides posted margin by the three-year range of contract dollar value and states the result as a percentage, so capital use can be compared across markets.
Entries in this reading3 entries
Liquidity filter46 readingsOpen interest analysis46 readingsCurrent trackFutures contract selection51 readings

What the ranking reports

Relative futures liquidity is produced by multiplying contract point value, a three-year maximum price move, open interest, and a volume factor.

Relative contract liquidity states the same ordering as a contracts-to-trade count times total open interest times that volume factor. Markets are then lined up from easiest to hardest to transact on that measure.

Filter names that cannot take the size

A liquidity filter is a pre-trade screen that keeps only listed futures whose activity, open interest, and size-adjusted rank can support the intended order. Names that fail that screen are dropped before any later comparison.

On the comparative display, a denser run of activity marks signals heavier trading. One mark or none signals thin activity.

Put survivors on an equal-dollar grid

An equal-dollar column weights every listed future by contract value times the largest price change observed over three years. Each entry in that column represents the same dollar amount.

The contracts-to-trade figure then states how many contracts of one future are required to match another future's three-year maximum dollar price excursion. That count is the size adjustment used in the ranking.

Open interest and the volume factor

Open interest analysis uses the stock of outstanding futures positions as a capacity input when ranking how much size a market can absorb.

The volume factor is the greater of 1 and an exponential transform of volume relative to a 5000-contract base, minus 2. Floored at one, it lifts contracts whose volume is large relative to that 5000-contract reference.

Compare capital use on the same grid

Effective percent margin is margin dollars divided by the three-year range of contract dollar value, then multiplied by one hundred. Capital use is then comparable across markets.

Percent margin is posted margin as a share of current contract value and is shown beside the range-adjusted figure.

Choose the listed future after the screen

Futures contract selection is the step that chooses which listed future to implement after liquidity, open interest, equal-dollar size, and margin efficiency have been compared.

An equity proxy for trading liquidity

For equities, period volume as a percentage of shares outstanding is treated as share turnover, a turnover-rate proxy for trading liquidity.

Posted vs effective percent margin, ranked by relative liquidity

Each listed future is shown in the same descending liquidity order as the March 2010 Stocks & Commodities table, with posted percent margin beside range-adjusted effective percent margin. Rate products at the top of the list (Eurodollar, Euribor, Short Sterling, fed funds) use almost no margin relative to their three-year dollar range, while Long Gilt, U.S. Treasury bonds, and the S&P contracts sit far higher, so the liquidity screen and the capital-use comparison can be read on one grid. Figures are the published table entries, not a count of the liquidity dots.
Each listed future is shown in the same descending liquidity order as the March 2010 Stocks & Commodities table, with posted percent margin beside range-adjusted effective percent margin. Rate products at the top of the list (Eurodollar, Euribor, Short Sterling, fed funds) use almost no margin relative to their three-year dollar range, while Long Gilt, U.S. Treasury bonds, and the S&P contracts sit far higher, so the liquidity screen and the capital-use comparison can be read on one grid. Figures are the published table entries, not a count of the liquidity dots.Listed commodity and financial futures · March 2010

Effective percent margin is margin dollars divided by the three-year range of contract dollar value, times 100. Names appear in the source relative-liquidity order; the equal-dollar contracts-to-trade column uses a three-year maximum price excursion.

Educational research material, not investment advice. Historical source context does not establish present-day performance.
3 of 51 in the Futures contract selection track
201093-93 pp.Next on Futures contract selectionA liquidity filter for executable futures contract selectionA futures liquidity ranking is a filter for executable contracts, not a forecast of direction.
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
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All 51 readings tagged Futures contract selection
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