Stock Liquidity

Stock Liquidity Analysis Skill

Analyzes stock liquidity across multiple dimensions — bid-ask spreads, volume patterns, order book depth, estimated market impact, and turnover ratios — using data from Yahoo Finance via yfinance.

Liquidity matters because it determines the real cost of trading. The quoted price is not what you actually pay — spreads, slippage, and market impact all eat into returns, especially for larger positions or less liquid names.

Important: This is for research and educational purposes only. Not financial advice. yfinance is not affiliated with Yahoo, Inc.

Step 1: Ensure Dependencies Are Available

Current environment status:

!`python3 -c "exec('try:\n import yfinance, pandas, numpy\n print(f\'yfinance={yfinance.__version__} pandas={pandas.__version__} numpy={numpy.__version__}\')\nexcept Exception:\n print(\'DEPS_MISSING\')')"`

If DEPS_MISSING, install required packages:

import subprocess, sys
subprocess.check_call([sys.executable, "-m", "pip", "install", "-q", "yfinance", "pandas", "numpy"])

If already installed, skip and proceed.

Step 2: Route to the Correct Sub-Skill

Classify the user's request and jump to the matching section. If the user asks for a general liquidity assessment without specifying a particular metric, run Sub-Skill A (Liquidity Dashboard) which computes all key metrics together.

Defaults

Sub-Skill A: Liquidity Dashboard

Goal: Produce a comprehensive liquidity snapshot combining all key metrics for one or more tickers.

A1: Fetch data and compute all metrics

import yfinance as yf
import pandas as pd
import numpy as np

def liquidity_dashboard(ticker_symbol, period="3mo"):
    ticker = yf.Ticker(ticker_symbol)
    info = ticker.info
    hist = ticker.history(period=period)

    if hist.empty:
        return None

    # --- Spread metrics (from current quote) ---
    bid = info.get("bid", None)
    ask = info.get("ask", None)
    current_price = info.get("currentPrice") or info.get("regularMarketPrice") or hist["Close"].iloc[-1]

    spread = None
    spread_pct = None
    if bid and ask and bid > 0 and ask > 0:
        spread = round(ask - bid, 4)
        midpoint = (ask + bid) / 2
        spread_pct = round((spread / midpoint) * 100, 4)

    # --- Volume metrics ---
    avg_volume = hist["Volume"].mean()
    median_volume = hist["Volume"].median()
    avg_dollar_volume = (hist["Close"] * hist["Volume"]).mean()
    volume_std = hist["Volume"].std()
    volume_cv = volume_std / avg_volume if avg_volume > 0 else None  # coefficient of variation

    # --- Turnover ratio ---
    shares_outstanding = info.get("sharesOutstanding", None)
    float_shares = info.get("floatShares", None)
    base_shares = float_shares or shares_outstanding
    turnover_ratio = round(avg_volume / base_shares, 6) if base_shares else None

    # --- Amihud illiquidity ratio ---
    # Average of |daily return| / daily dollar volume
    returns = hist["Close"].pct_change().dropna()
    dollar_volume = (hist["Close"] * hist["Volume"]).iloc[1:]  # align with returns
    amihud_values = returns.abs() / dollar_volume
    amihud = amihud_values[amihud_values.replace([np.inf, -np.inf], np.nan).notna()].mean()

    # --- Market impact estimate (square-root model) ---
    # For a hypothetical order of 1% of ADV
    adv = avg_volume
    order_size = adv * 0.01
    daily_volatility = returns.std()
    sigma = daily_volatility
    participation_rate = order_size / adv if adv > 0 else 0
    impact_bps = sigma * np.sqrt(participation_rate) * 10000  # in basis points

    return {
        "ticker": ticker_symbol,
        "current_price": round(current_price, 2),
        "bid": bid,
        "ask": ask,
        "spread": spread,
        "spread_pct": spread_pct,
        "avg_daily_volume": int(avg_volume),
        "median_daily_volume": int(median_volume),
        "avg_dollar_volume": round(avg_dollar_volume, 0),
        "volume_cv": round(volume_cv, 3) if volume_cv else None,
        "shares_outstanding": shares_outstanding,
        "float_shares": float_shares,
        "turnover_ratio": turnover_ratio,
        "amihud_illiquidity": round(amihud * 1e9, 4) if not np.isnan(amihud) else None,
        "daily_volatility": round(daily_volatility * 100, 2),
        "impact_1pct_adv_bps": round(impact_bps, 2),
        "observations": len(hist),
    }

A2: Interpret and present

Present as a summary card. For the Amihud illiquidity ratio, multiply by 1e9 for readability (standard convention).

Liquidity grade (use these rough thresholds for US equities):

When comparing multiple tickers, show a side-by-side table and highlight which is more liquid and why.

Sub-Skill B: Spread Analysis

Goal: Detailed bid-ask spread analysis including current spread, historical context from options data, and effective spread estimates.

B1: Current spread from quote

import yfinance as yf

def spread_analysis(ticker_symbol):
    ticker = yf.Ticker(ticker_symbol)
    info = ticker.info

    bid = info.get("bid", 0)
    ask = info.get("ask", 0)
    bid_size = info.get("bidSize", None)
    ask_size = info.get("askSize", None)
    current_price = info.get("currentPrice") or info.get("regularMarketPrice", 0)

    result = {"bid": bid, "ask": ask, "bid_size": bid_size, "ask_size": ask_size}

    if bid > 0 and ask > 0:
        midpoint = (bid + ask) / 2
        result["absolute_spread"] = round(ask - bid, 4)
        result["relative_spread_pct"] = round((ask - bid) / midpoint * 100, 4)
        result["relative_spread_bps"] = round((ask - bid) / midpoint * 10000, 2)
    return result

B2: Options spread context

Options data from yfinance includes bid/ask for each strike, which gives a sense of derivatives liquidity. Use the nearest expiration, extract near-the-money calls and puts, and compute spread and spread percentage for each.

See references/liquidity_reference.md § "Options Spread Analysis" for the full code template.

B3: Present results

Show:

• Current quoted spread (absolute, relative %, basis points)
• Bid/ask sizes if available
• Near-the-money options spreads for context