| (To be read while listening to Countdown) |
A TFP exclusive, it's been awhile since we published our last Margin Weighted Dollarized Average True Range (mwDATRTM) analysis of the futures markets. In the past few months, volatility has expanded, the exchanges have played havoc with margin requirements, and the world continues to revolve around government debt reactions.
So, the time has come to take a fresh look at how futures instruments compare with one another in relation to the dollarized moves each day. You can click on the image to launch the nifty google interactive spreadsheet and export it for your own sorting and analysis. 
There are few surprises in this analysis. But wow, hi-oh sillverrr! SI has been experiencing intraday moves fueled by rocket propellant. We have highlighted the most volatile and liquid instruments in the bunch. Dollarized ATR is an average number of dollars each instrument moves each day per contract. We look for an average daily volume of at least 100,000 cars. mwDATRTM is a measure of bang for your buck. We take the Dollarized ATR and divide by the required margin for a comparison of how each instrument moves relative to its margin requirements.
In 2011, we notice several interesting things. The Dollarized ATRs are higher across the board – a volatility traders delight. Yet, it's no wonder hedge funds experienced one of their more difficult years, MF Global disaster aside.
We also see that the wild statistical outliers in mwDATRTM that existed last year have been neutered by the exchanges. Last year, traders were able to pack a whallop with Aussie Dollars, Canadian Loonies, Swiss Francs, Corn, Oats, and Wheat with mwDATRTM values exceeding 50%. This year, the exchanges have more quickly revised margin requirements to reign in those HFT induced algo blasts as mwDATRTM values are balanced around more tightly contained ranges. However, with many commodities offering $2,000+ moves each day per contract, the HFT algo bots have been having a field day.
So, this holiday season – gold, oil, and Russell traders rejoice! Like Rush's shuttle launch, you made the top three volatility and liquidity list.
Originally published on Trade Flight Plan.
