Which commodities are, in general, considered to be most liquidly traded?

does it matter which is the most liquid one? there are a lot of very liquid commodities. Also do you only consider the listed futures to be liquid or OTC swaps for example as well?

My challenge is to create some kind of liquidity ranking for (exchange traded) commodity options. I need this information in order to optimally chose calibration tools for a pricing model. Swaps are not relevant, yet i can imagine to include other otc contracts in my analysis.By now my approach is based on trading volume information i retrieve from bloomberg. However, this argument doens't fully satisfy me. It would be great to have a benchmark ranking to compare my results to.

you can also use bid ask spread as a measure of liquidity. probably can download from bbg..

Or look at just the open interest of the futures of the commodities your considering. There should be a reasonable correlation between size of open interest in the future and how developed the option market is. Ignoring OTC might bias your list considerably

I'm already regarding bid ask spreads and open interest and i can indeed observe a correlation between futures and option liquidity.- I ask myself wether there is a source beyond bloomberg that i can use to validate my ranking? Not necessary raw trading data, some sort of study would also serve me as an argument.- Where can i get compareable and up to date OTC trading data for commodities? What bias do you expect while ignoring OTC trading?

Amihud's ratio is the one you should focus.

certain commodities such as oil, wine, olive oil, milk are very liquid

don't forget frozen orange juice and coffee

I agree with you that viscosity is a good alternative measure for the liquidity of commodities However, a quite simple "benchmark rating" has come to my mind, namely the weights of commodies in commodity indexes such as DJ UBS CI. They partly derive their weights from liquidity arguments. Actually my ranking is quite in line with the index components...Some more ideas concerning the OTC issue?

Another thought:are you choosing between commodities (oil,gas,gold,...)choosing between contracts for a given commodity (WTI, Brent, Dubai, ...)choosing between maturities for a given commodity contract (Feb 2010, Mar 2010, ...)According to academics I know, most of commodity liquidity is in futures, much less in options. But I'm not (yet) a practisioner.I think you'll find WTI and Brent crude oil, nearest and 2nd nearest months futures are the most liquid commodity contracts in the world. Greatest liquidity falls away from 1st month to 2nd month in a fairly predictable manner before maturity for a given commodity, as people roll.You also get spots of liquidity further along the WTI futures curve in the December contracts, see for WTI http://www.cmegroup.com/trading/energy/ ... tures.html and look at the open interest.Good idea on the commodity index compositions. But I think their major weighting is "composition of world trade" or similar.

Hi willsmith, thanks for your reply!I'm glad your observations regarding the crude oil contracts confirm the results of my present analysis Perhaps you can also help me with my question on pricing models: http://www.wilmott.com/messageview.cfm? ... adid=75397