10a COMPleTe gUiDe TO THe FUTUres MarKeT
initial months (and sometimes even years) of trading. By monitoring the volume and open interest 
fi  gures, a trader can determine when the market’s level of liquidity is suffi   cient to warrant participa-
tion. Figure   1.1    shows February 2016 gold (top) and april 2016 gold (bottom) prices, along with 
their respective daily volume fi  gures. February gold’s volume is negligible until november 2015, 
at which point it increases rapidly into December and maintains a high level through January (the 
February contract expires in late February). Meanwhile, april gold’s volume is minimal until Janu-
ary, at which point it increases steadily and becomes the more actively traded contract in the last 
two days of January—even though the February gold contract is still a month from expiration at 
that point.  
 The breakdown of volume and open interest fi  gures by contract month can be very useful in 
determining whether a specifi  c month is suffi   ciently liquid. For example, a trader who prefers to 
initiate a long position in a nine-month forward futures contract rather than in more nearby con-
tracts because of an assessment that it is relatively underpriced may be concerned whether its level 
of trading activity is suffi   cient to avoid liquidity problems. in this case, the breakdown of volume and 
open interest fi  gures by contract month can help the trader decide whether it is reasonable to enter 
the position in the more forward contract or whether it is better to restrict trading to the nearby 
contracts. 
 Traders with short-term time horizons (e.g., intraday to a few days) should limit trading to the 
most liquid contract, which is usually the nearby contract month.   
    FIGURE   1.1    V olume shift in gold Futures
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