This report shows a breakdown of open interest positions in three different categories. Because the COT measures the net long and short positions taken by speculative traders and commercial traders, it is a great resource to gauge how heavily these market players are positioned in the market. For example, traders are classified as non-commercial or commercial, and that holds for every position they have within that particular commodity. This means that an oil company with a small hedge and a much larger speculative trade on crude will have both positions show up in the commercial category.
Commitments of Traders Data (COT)
This is where COT stands out, as it relies on a different type of data that doesn’t take prices into account; the data is simply driven from the total number of open positions and has nothing to do with instrument pricing. As a result, a classic bullish set-up for a given market would be when large traders are net long and small traders are net short. Keep in mind that the small trader’s net position is usually vulnerable to either long liquidation or short-covering if the market starts to move against them. These are institutional investors, including pension funds, endowments, insurance companies, mutual funds and those portfolio/investment managers whose clients are predominantly institutional.
How the Commitments of Traders (COT) Report Works
OANDA Corporation is not party to any transactions in digital assets and does not custody digital assets on your behalf. Any positions in digital assets are custodied solely with Paxos and held in an account in your name outside of OANDA Corporation. Paxos is not an NFA member and is not subject to the NFA’s regulatory oversight and examinations. The Commitment of Traders (COT) report is a weekly publication that shows the aggregate holdings of different participants in the U.S. futures market. As we all know, financial markets are highly correlated, and the COT report can sometimes provide insights from other markets different from the one we are trading in.
Commitments of Traders (COT) Charts
While the position data is supplied by reporting firms, the actual trader category or classification is based on the predominant business purpose self-reported by traders on the CFTC. As the name suggests, this category represents large institutions and traders looking to speculate on different commodities and market instruments with the goal of making a profit on their speculative positions. Traders fall into this category once they exceed a specific number of traded contracts set by the CFTC for each commodity or instrument. Examples of large investors can be hedge funds, institutional investors, and other types of large financial firms that specialize in trading specific instruments as investments. This category of traders are usually trend followers and, in some cases, can also be considered a well-informed group.
When graphically shown on charts, you actually see what is referred to as the Net Traders Positions which is the actual difference between the number of long positions held by each group minus the number of short positions. Thus a positive number means they hold more long positions than short and vice versa. The long and short open interest shown as “Nonreportable Positions” is derived by subtracting total long and short “Reportable Positions” from the total open interest. Accordingly, for “Nonreportable Positions,” the number of traders involved and the commercial/non-commercial classification of each trader are unknown. It is also worth noting that the only trader category that was supporting and following the price action were the small speculators. One of the main problems that traders face when using various trading tools is that many indicators are based on price data, and therefore, in many cases, the different indicators end up duplicating the same message.
The CFTC requires large speculators and commercial traders, or hedgers, to report their net positions twice each month. Forex commitment of traders reports are based on the corresponding futures contracts traded on the Chicago Mercantile Exchange. The COT provides an overview of what the key market participants think and helps determine the likelihood of a trend continuing or coming to an end. If commercial and non-commercial long positions are both growing, for example, that is a bullish signal for the price of the underlying commodity.
- For example, a trader holding a long put position of 500 contracts with a delta factor of 0.50 is considered to be holding a short futures-equivalent position of 250 contracts.
- These are institutional investors, including pension funds, endowments, insurance companies, mutual funds and those portfolio/investment managers whose clients are predominantly institutional.
- A major advantage of the COT report is that it provides us with historical extreme position levels.
- This means that if prices are rising, commercial traders are expected to be selling, and if prices are declining, commercial traders are expected to be buying.
- The COT Public Reporting Environment (PRE) provides an application programming interface (API) to allow users to customize their experience with the COT market report data.
There have been recommendations to publish more detailed data on a delay as not to affect commercially sensitive positions, but that still looks unlikely. And, despite its limitations, most traders agree that even the questionable data of the COT is better than nothing. Ignore the commercial positions for now, since those are mainly for hedging while small retail traders aren’t relevant. Barchart Premier Members can choose from a Detailed Report where you can page through the last 52 reported weeks of data, or a Summary Report, showing just the last reporting period. The number “non-reportable” positions are derived from subtracting the number of large spec and commercial positions from the total open interest. That is, the total of all futures and/or option contracts entered into and not yet offset by a transaction, by delivery, by exercise, and so on.
Different types of traders and businesses utilize the futures market to hedge their risk or lock in a specific market price. Examples of commercials or hedgers can be a crop producer looking to hedge the risk of any potential decline in price in the future; an airline looking to take advantage of or lock in a low price on oil is also another example. Since commercials are hedging, their positions are usually against the market. This means that if prices are rising, commercial traders are expected to be selling, and if prices are declining, commercial traders are expected to be buying.
The aggregate of all traders’ positions reported to the Commission usually represents 70 to 90 percent of the total open interest in any given market. From time to time, the Commission will raise or lower the reporting levels in specific markets to strike a balance between collecting sufficient information to oversee the markets and minimizing the reporting burden on the futures industry. The category called “dealer/intermediary,” for instance, represents sellside participants. Typically, these are dealers and intermediaries that earn commissions on selling financial products, capturing bid/offer spreads and otherwise accommodating clients.
Traders follow the COT report to identify extreme levels of long or short positions in a currency, which may signal a trend reversal. This report shows the changes in open positions of futures traders, including commercials, small speculators, and large speculators. Forex traders may use currency derivatives COT reports to find large net long or net short positions. The report provides investors with up-to-date information on futures market operations and increases the transparency of these complex exchanges.
Adam Hayes, Ph.D., CFA, is a financial writer with 15+ years Wall Street experience as a derivatives trader. Besides his extensive derivative trading expertise, Adam is an expert in economics and behavioral finance. Adam received his master’s in economics from The New School for Social Research and his Ph.D. from the University of Wisconsin-Madison in sociology. He is a CFA charterholder as well as holding FINRA Series 7, 55 & 63 licenses. He currently researches and teaches economic sociology and the social studies of finance at the Hebrew University in Jerusalem. Many traders and analysts use this tool and have developed custom indicators driven by COT.
COT reports can be obtained from the CFTC website and can be downloaded in several file formats.
The COT Public Reporting Environment (PRE) provides an application programming interface (API) to allow users to customize their experience with the COT market report data. The API allows users to search and filter across columns for each of the datasets, including reporting date or week, commodity groups, subgroups, or name, and contract market name. Customized data report results can commitment of traders report forex be downloaded to available formats — CSV, RDF, RSS, TSV, or XML. Large traders (funds) are typically trend-followers and will add or liquidate their positions depending on the technical action of the market since the release date of the report. The Open Interest represents the total number of contracts, including both buy and sell positions, outstanding between all market participants.
Therefore, traders always look for different types of indicators to incorporate into their strategies. Every other reportable trader that is not placed into one of the other three categories is placed into the “other reportables” category. The market will be in a weakened bullish set-up “if” the two-week trend in the large trader position is down, or in other words, if the funds are in the process of liquidating their net long position. There are many different ways to analyze the reports, but for the most part, the large traders’ net position and “change in position” over a two week period are the most important numbers to watch.
Reportable traders that are not placed into one of the first three categories are placed into the “other reportables” category. The traders in this category mostly are using markets to hedge business risk, whether that risk is related to foreign exchange, equities or interest rates. This category includes corporate treasuries, central banks, smaller banks, mortgage originators, credit unions and any other reportable traders not assigned to the other three categories.
Looking at forex trading, the chart below shows GBP/USD with its COT net positions applied. The focus here is on the position levels when it reaches its all-time extreme and the price action development afterwards. We can see that historical extreme positioning levels represented historical price turning points. Market participants also look for divergences between different categories to identify potential short- or long-term reversals. The supplemental report is the one that outlines 13 specific agricultural commodity contracts.
Simply put, even the disaggregated data is too aggregated to be said to accurately represent the market. As the value of the net short positions of non-commercial traders (the green line) dropped, so did EUR/USD. The argument here is that delayed data is also considered to be discounted by current market prices and therefore not useful. A major advantage of the COT report is that it provides us with historical extreme position levels. These extreme position levels, whether long or short, can be significant for traders as they may represent a turning point.
The noncommercial participants are split between managed money and other reportables. The short format shows reportable open interest and week-to-week open interest changes separately by reportable and non-reportable positions. For reportable positions, additional data is provided for commercial and non-commercial holdings, spreading (in certain categories only), changes from the previous report, percent of open interest by category, and numbers of traders.
The larger the net short position of the small trader (relative to history) and the extent that small traders are holding a position “against” the trend are factors that will add to the bullishness of the report. The COT report’s results can be used as a tool to give traders a better understanding of the psychology of the marketplace, the net position of the commercials in the market, and the net position of the large traders. This group of traders is generally thought to be small speculators and hedgers who are not holding a position large enough to report to the CFTC.
The Commitments of Traders is a weekly report published by the Commodity Futures Trading Commission (CFTC). The report provides details on traders’ positions in a categorized format according to trader type. The report is released every Friday afternoon, and its data covers up to the end of the trading day on Tuesday of the same week.
Although markets grow and do break and create new position levels, the existing historical position levels have proved to be significant many times in the past. This category includes the total positions for other market participants who don’t fall under the previously mentioned categories. This group is also another large segment of market participants and is also considered to be trend followers; however, their trading approaches towards different markets can vary significantly. Generally, the data in the COT reports is from Tuesday and released Friday. The CFTC receives the data from the reporting firms on Wednesday morning and then corrects and verifies the data for release by Friday afternoon. It aggregates the holdings of participants in the U.S. futures markets (primarily based in Chicago and New York), where commodities, metals, and currencies are bought and sold.
There is no magical indicator that will tell us where the market is headed; however, using different types of indicators that are independent from each other can help a trader make a more informed decision. The fact that COT report data is independent of price action makes it a different type of indicator when compared to the many and mostly used ones, and therefore it may add value to a trading plan. The legacy COT report separates reportable traders only into “commercial” and “non-commercial” categories. The long report, in addition to the information in the short report, groups the data by crop year, where appropriate, and shows the concentration of positions held by the largest four and eight traders. Due to legal restraints (CEA Section 8 data and confidential business practices), the CFTC does not publish information on how individual traders are classified in the COT reports. Looking at the COT example in the table above, we can see that Nasdaq 100 futures, traded on the Chicago Mercantile Exchange (CME) had an open interest of 57,779 contracts on June 15, 2021.
Of these, 14,320 were longs held by dealers and 10,875 shorts sold by institutional traders. The long version of a COT report, in addition to the information in the short report, groups the data by crop year, where appropriate, and shows the concentration of positions held by the largest four and eight traders. Traders can use the report to help them determine which positions they should take in their trades, whether that’s a short or a long position. One thing the report does not do is categorize individual traders’ positions because of legal restraints. This is part of confidential business practices, according to the commission.
Both cases represent negative divergence and reflect that both trader categories are supportive of the latest upside price action. Shortly after, the EUR/USD price entered a bear market, which lasted almost 18 months (in red). The COT report can also be considered a sentiment indicator as traders adjust their positions in anticipation of an expected event such as FED interest rate announcements or major changes in the economic or political environment. The advantage here is that the sentiment data is representative of different market participant categories as well as for each specific instrument, hence providing detailed and broken-down sentiment data that many traders find useful. The report history provides historical positioning thresholds or extremes that were previously reached.
These figures are not netted, but instead show overall volume (that is, interest). Speculators are not able to deliver on contracts and have no need for the underlying commodity or instrument, but buy or sell with the intention of closing their “sell” or “buy” position at a profit, before the contract becomes due. We introduce people to the world of trading currencies, both fiat and crypto, through our non-drowsy educational content and tools. We’re also a community of traders that support each other on our daily trading journey. In early October 2009, EUR futures net long positions hit an extreme of 51,000 before reversing.
The Commitment of Traders Report is a breakdown of each Tuesday’s open interest in the major futures markets as reported by the US Commodity Futures Trading Commission (CFTC). Leveraged trading in foreign currency contracts or other off-exchange products on margin carries a high level of risk and may not be suitable for everyone. Trading in digital assets, including cryptocurrencies, is especially risky and is only for individuals with a high risk tolerance and the financial ability to sustain losses.
Open interest is the total of all futures and/or option contracts entered into and not yet offset by a transaction, by delivery, by exercise, etc. The aggregate of all long open interest is equal to the aggregate of all short open interest. Open interest is the total of all futures and/or option contracts entered into and not yet offset by a transaction.
The reports are read as tables, which each row and column labeled appropriately (see the example above). The information in the report indicates how much interest there is, both long and short, in various derivatives contracts, and which type of market actor is involved. This is meant to provide a clearer picture of what the people with skin in the game—the users of the actuals—think about the market versus the people with profit motivations or speculators. The disaggregated COT report is, in part, a response to some of the criticism of the legacy COT.
