COT Report - Explained
OK - let's look at how the COT report is presented every Friday, and I will explain all the terms and details for you - one thing I should say at this point is that you do not need to be an expert in futures trading in order to understand the content of the report, but it helps if you understand a little! - if you would like an overview of the futures market in general and how it works, please take a look at one of my other sites which explains futures trading in more detail. This is available in the navigation bar above.
COT Report - Contents & Terms
Let's take a look at a typical extract from the COT report, and to start with I will explain both the content and the terms. The CFTC do not make it easy for us to interpret as the information provided is not consolidated for us, but reported by each exchange separately, of which there are 9! I have taken a typical report for the Canadian Dollar from the CME and it's shown below:
CANADIAN DOLLAR - CHICAGO MERCANTILE EXCHANGE Code-090741
FUTURES ONLY POSITIONS AS OF 01/29/08 |
--------------------------------------------------------------| NONREPORTABLE
NON-COMMERCIAL | COMMERCIAL | TOTAL | POSITIONS
--------------------------|-----------------|-----------------|-----------------
LONG | SHORT |SPREADS | LONG | SHORT | LONG | SHORT | LONG | SHORT
--------------------------------------------------------------------------------
(CONTRACTS OF CAD 100,000) OPEN INTEREST: 90,907
COMMITMENTS
25,948 21,653 1,870 34,077 48,253 61,895 71,776 29,012 19,131
CHANGES FROM 01/22/08 (CHANGE IN OPEN INTEREST: 4,529)
1,485 4,867 -891 3,093 1,412 3,687 5,388 842 -859
PERCENT OF OPEN INTEREST FOR EACH CATEGORY OF TRADERS
28.5 23.8 2.1 37.5 53.1 68.1 79.0 31.9 21.0
NUMBER OF TRADERS IN EACH CATEGORY (TOTAL TRADERS: 68)
20 16 5 20 18 44 35
I did say it wasn't very pretty! OK - several things to notice. Firstly this is one report for one exchange on one contract, and this is the shortened form. The CFTC provides this report in both a long and short form, and also for both futures and, future and options, combined. Personally I only use the short form for futures only, which is what you are looking at in the above example.
Secondly, each report will contain all the futures products promoted by the exchange, so each exchange report will include the above details for each contract whether this is commodities, equities, indices, or currency, so it is can be time consuming to collect all the information we need. OK - let me explain all the above terms which as you can see are for the Canadian Dollar, on the CME exchange up to 29/01/08 ( Tuesday ) and which were released on Friday 1st February 2008, and for Futures ONLY (they do supply futures and options data combined). The contract size is 100,000 which is the minimum for this contract.
The report provides open interest contract volume on three 'groups' of traders, namely commercial, non commercial and non-reportable.
| Term | Explanation |
| Commercial | Commercial means traders who are involved in futures trading because they are involved in the production, processing or selling of the commodity, and therefore use futures contracts primarily to hedge future prices. A simple example would be the farmer hedging against falls in the future price of cattle or corn. |
| Non- Commercial | Non commercial in effect means speculators, and typically these would be the large institutions and hedge funds, who are purely buying and selling contracts for speculative profits both long and short. |
| Non-reportable Positions | Non-reportable means in essence - everyone else! - this includes all the small traders buying one or two contracts - in other words you and me! |
| Long | Number of contracts which are long - expecting prices to rise |
| Short | Number of contracts expecting prices to fall |
| Spreads | The spreads figure measures the extent to which a non-commercial trader holds equal long and short futures positions, in other words a spread trade where the trader is long one contract and short another. |
| Open Interest | Open interest is the total number of futures or options contracts not yet offset by a transaction, by delivery or exercise . |
| Number of traders | This is the total number of traders who are required to report positions to the CFTC |
OK - now let's see how the numbers are arrived at in the report.
COT Report - The Numbers
Let's start by looking at the total column for the non-commercial (NC) and commercial traders (C), which is the sum of these plus the spreads (SP) :
Long: 61,895 = 25,948 ( NC) + 34,077 (C) + 1,870(SP)
Short: 71,776 = 21,653 ( NC) + 48,253 (C) + 1,870(SP)
OK - now the non reportable (NR) positions are actually derived from the above by deducting them from the Open Interest (OI) figures to arrive at the totals as follows :
Long: 29,012 = 90,907 (OI) - 61,895 ( from above )
Short: 19,131 = 90,907 (OI) - 71,776 ( from above )
On the next line we can see the changes week on week, so for example we can see that the OI volume has gone up by 4,529, and that total long and short contract volumes have increased for non commercial and commercial by 3,687 and 5,388 respectively.
The percentage figures on the next line simply convert the numbers to - percentages! - so for long contracts of non commercial (NC) 25,948 as a percentage of the total of 90,907 (OI) is 28.5 %
OK - that's how the numbers are presented and what they mean - now let's take a look at how I use the COT report to help me in my trading.
