​​The bid-ask spread is a useful indicator of an asset's liquidity. When studying derivatives markets, the spread can be…

​​The bid-ask spread is a useful indicator of an asset's liquidity. When studying derivatives markets, the spread can be used to identify liquid contracts.

Derivatives markets tend to be more fragmented, with contracts of many expiration dates and strike prices, resulting in a significant number of very low liquid contracts with wide spreads. By charting three Ethereum contracts on Deribit,we show how spreads differ depending on the expiry.

The Ethereum Perpetual Future, the June quarterly expiry, and the September quarterly expiry were charted, and as predicted, the highly liquid EthPerp contract had the narrowest spreads, with the September contract (the furthest expiry) with the widest spreads.