What are the top 10 Liquid Futures Contracts?
While there are many different futures trading contracts, in terms of liquidity and volume not every futures contract looks the same. Liquidity is an important aspect of trading the futures market especially for a day trader. You wouldn't want to end up trading a futures contract where the lack of liquidity leaves you with wide spreads or bad fills on your orders. In order to make a stable and consistent profit, it is best for futures traders to trade the liquid futures contracts.
Like they say, there is strength in numbers, trading highly liquid futures contracts can help you to day trade the futures contracts effectively, and the liquidity will also ensure to provide a safe cushion from unexpected market volatility. It takes a lot more effort to move prices around in a highly liquid contract compares to a futures contract that is thin on liquidity.
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The chart below shows the top 10 liquid futures contracts by volume across different futures exchanges.
For some futures day traders, it is possible that their futures broker might offer only contracts from the CME group or contract from across a limited number of futures trading exchanges.
If you are looking for the most liquid futures contracts and specific to the CME group, here is the list of the top 10 futures contracts that you can safely trade. The difference between the first and the second list being that, the top 10 liquid futures contracts are selected specifically from the CME Group, which is one of the largest and most popular futures trading exchange. Therefore, futures traders will be able to find the top 10 liquid futures contracts mentioned below, suitable for day trading as well as swing trading.
1. S&P500 E-mini (ES)
The S&P500 emini futures contract attracts an average trading volume of over 1.6 million in contracts traded on any given day. Without a doubt the S&P500 emini futures contracts stands head and shoulders above the rest. What makes it attractive to trade are the low day trading margins and the tick size. Not to forget, the fact that the S&P500 emini futures contracts track the underlying S&P500 stock index thus making it easy for speculators to gain exposure into one of the most widely tracked stock index futures.
Due to the fact that the S&P500 trades almost round the clock, traders that based around the world are able to trade the stock index future with ease. The low tick size makes it relatively easy for futures day traders to manage their risks with little capital requirements. The S&P500 emini futures contracts are highly liquid and come in four quarterly trading contracts. Although there is the standard S&P500 big futures contracts, speculators and hedge funds have long flocked to the emini futures contracts due to the liquidity and the smaller trading conditions on the contract. For traders looking to get started in futures trading, the emini S&P500 futures contracts makes for the right choice.
The S&P500 emini futures contracts are also known to be technical analysis friendly futures contract, meaning that trends are sustained and there are many trading strategies that are built/designed specifically to be used with the S&P500 emini futures contracts.
2. 10 Year T-Notes (ZN)
It is not surprising to find that the 10-year Treasury note futures ranks as the number two in the list of the top 10 most liquid futures contracts. The 10-year Treasury note is placed at a comfortable 10-year maturity period. It is not too short term and therefore is resilient to the short term interest rates and at the same the maturity is not too far out into the future, again making it more resilient to the market forces that act on the longer term maturities such as the 30-year. The 10-year T-Note futures track the underlying cash market of the 10-year Treasury note issued by the U.S. department of Treasury. Futures traders who trade the 10-year T-Note futures have the option to speculate on the interest rates and are able to go long and short with relative ease. The big difference between the underlying cash market and the futures market being that the futures contracts can be settled for cash so there is no physical delivery of the 10-year T-note involved.
While speculators find it attractive to trade the interest rates, traders who have actual exposure to the underlying market can also hedge their risks by trading the futures derivatives contracts of the 10-year T-Note futures.
The 10-year T-Note futures also come with reasonably low margin requirements for swing traders and the margin requirements for day traders are also very competitive. Alongside the e-mini futures contracts, the debt market futures derivatives from the 10-year T-Note futures offers futures traders a balance and a mix of both equities and debt.
3. Crude Oil (CL)
Crude oil futures come in as the third most liquid futures contract and ranks as the first among the commodity futures contracts. Crude oil futures are traded at the New York Mercantile Exchange (NYMEX) part of the CME group and the futures contract tracks the underlying market of the light sweet crude oil with the ticker CL. Note that ICE futures, another futures exchange also offers crude oil futures trading but is not to be confused with the oil futures contracts with the ticker CL, exclusive from the CME Group.
Having an average daily trading volume of close to 800k, the crude oil futures make for an exciting market to trade. Known for its volatility and the fundamentals that keep changing within a short period of time, the volatility in crude oil prices is one of the factors that attract traders to the crude oil futures markets.
The crude oil futures contracts trade on a monthly basis and are rolled over into the next month making crude oil traders quite an active participant into the oil markets. The ability to go long or short within a moment’s notice makes it easy for traders to speculate on oil prices. On any given week there is bound to be some news that influences the price of oil.
4. 5-Year T-notes (ZF)
Market participants with exposure to the bond markets will find the 5-year T-Note futures to be an attractive alternative to the 10-year T-Note futures. So while it is debatable as to which of the two futures contracts to trade, the 5-year T-Note futures is ideal for speculators but also market participants who have an exposure in the actual underlying cash markets. The 5-year futures contracts is an attractive contract to trade which also comes with the benefit of deep liquidity and is traded against other points in the yield curve.
The Federal Reserve's monetary policies find a bigger influence on the 5-year T-Note futures like most short term interest rate or Treasury instruments. The 5-year T-Note futures are offered by the Chicago Board of Options Trade (CBOT) and are standardized. The face value of the 5-year T-Note futures is $100,000 and comes with four quarterly contract months and the futures contracts are traded almost round the clock.
5. Gold (GC)
Gold futures contracts are the fifth most liquid futures contract and ranks second among commodity futures, only next to crude oil. Gold futures contracts attract an average daily trading volume of over 300k contracts. Although gold futures contracts are a bit expensive to trade, futures traders flock to the gold futures contracts, offered by COMEX, part of the CME group.
Known for its hedging purposes, gold futures contracts track the underlying spot gold markets and the futures prices are marked to market on a daily basis. Unlike ETF’s or spot markets where trading requires higher capital requirements or opens the risks of OTC trading, the gold futures markets offers a level of transparency and credibility.
Most of the gold futures contracts are made up of speculators who by and large do not have any interest in taking delivery of the physical metal. There are many different versions of gold futures contracts including micro or mini contracts, but among the different types, the standard gold futures contracts simply stand out above the rest. The day trading margins for gold are a bit expensive, but that doesn’t deter day traders from trading the standard gold futures contracts. The fact that the gold futures contracts are very liquid, and with the tick size of $10.00 makes it attractive for futures day traders to speculate on gold prices in the short term to make a decent profit.
6. EuroFx (6E)
The EuroFX futures or simply Euro futures are part of the currency futures class of contracts offered by the CME group. The Euro fx futures rank at number 6 in the futures contracts and ranks at the first place among currency futures.
The Euro Fx futures contracts or Euro/US dollar futures contracts from the CME group offers traders an attractive futures contract to gain exposure to the 27-nation single currency. The contracts in the Euro/US dollar are very liquid and come in notional values of €125,000. There are also other versions of the Euro Fx futures contracts including the e-mini and the e-micro. Still, among the three, the standard euro fx futures contracts is the most popular. The Euro Fx futures also come with low day trading margin requirements and for futures traders who prefer to swing trade the contracts; the standard margin requirements are fairly competitive.
The Euro/US dollar futures contracts come in four quarterly cycles and trades almost 24 hours a day. The Euro Fx futures track the prices of the underlying spot EURUSD prices with the contracts being marked to market on a daily basis.
7. 30 year T-Bonds (ZB)
The 30-year Treasury bond futures, also known as the T-Bond futures represent the 30-year maturity on interest rates. The 30-year interest rates are one of the most crucial factors as it helps in determining key rates such as the mortgage rates among other things. The 30-year T-Bond futures was originally launched in 1977 and is one of the widely traded bond futures contracts across speculators, hedge funds and other market participants. The T-Bond futures traders during three contract month periods of June, September and December with the contract size of $100,000
8. Japanese Yen (6J)
The Japanese yen futures contracts are the second most liquid currency futures contracts and ranks number eight in the overall list. The Japanese yen futures contracts give futures traders the exposure to the third largest economy in the world. Priced in at Japanese yen/US dollar (JPY/USD) the yen futures contracts are the inverse of the spot market prices of USD/JPY. The yen futures contracts control a contract size of ¥12,500,000 with a tick value of $6.25 and having a minimum tick of 0.0000005.
The Japanese yen is known for its unique characteristic as a safe haven currency. Therefore, this safe haven status makes it one of the go-to futures contracts when it comes to risk aversion. It is not just currency speculators who flock to the yen futures contracts but also traders and investors who have exposure to the equity markets. The yen currency tends to appreciate during times of low risk appetite or increased uncertainty in the markets, while the currency weakens when risk appetite increases.
9. 2-year T-Notes (ZT)
The 2-year Treasury-Note futures rank close to the short term Treasuries, only next to the 30-day Fed funds rate futures. The 2-year T-note futures are therefore vulnerable to the day to day economic data as well as the monthly Federal Reserve monetary policy meetings. The 2-year Treasury note futures track the underlying markets of the 2-year T-note bonds. The futures derivatives are offered on the CBOT exchange, part of the CME group and overall, the 2-year Treasury note is the third among the three interest rate futures derivatives that rank among the top 10 in terms of trading volume and liquidity.
It is quite understandable as to why the 2-year T-Note futures contracts alongside the five and ten year futures rank highly. The 2-year T-Note futures contracts come with a quarterly contract months of March, June, September and December and controls a contract size of $200,000 with a minimum tick of 0.0078125 with the dollar value of each tick priced at $15.625.
10. Eurodollars (GE)
Eurodollars are part of the interest bearing bank deposits that are denominated in U.S. dollars but held at banks outside the United States. Most tend to confuse the Eurodollars with Euro fx futures contracts. The Eurodollar futures are the ninth most popular futures contracts and are popular due to the fact that the futures contracts track the price of the underlying Eurodollar markets.
The Eurodollars are attractive for investors due to the fact that they do not fall under the jurisdiction of the Federal Reserve and also come with lower regulations. As a result, the high level of risk makes it attractive for investors, especially those who seek higher yields. The Eurodollar futures are available for trading in 10 contract months with a minimum tick size of 0.0025 with a tick value of $6.25.