Blog Single

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. The category called “dealer/intermediary,” for instance, represents sellside participants.

• Recovering US Treasury bond yields and risk aversion help the USD find demand and make it difficult for XAU/USD to shake off the selling pressure.
• This article is for general information purposes only, not to be considered a recommendation or financial advice.
• The weekly report details trader positions in most of the futures contract markets in the United States.

If you started trading in the last two decades, you’ve only known a world in which the euro is worth more than the US dollar. You’d have to go all the way back to 2002 to find data points representing the EUR/USD conversion rate that start with a zero to the left of the decimal point. Gold price staged a deep correction from the record top it set near $2,150 and declined below $2,050. Recovering US Treasury bond yields and risk aversion help the USD find demand and make it difficult for XAU/USD to shake off the selling pressure. The Japanese Yen is seen extending its steady intraday descent against the USD through the early European session. An uptick in the US bond yields revives the USD demand and helps USD/JPY to rebound from a multi-month low.

Commodity sector supported by peak rates, tight supply focus

A softer risk tone and rising Fed rate cut bets should cap any meaningful upside ahead of this week’s key macro data. COT reports can be obtained from the CFTC website and can be downloaded in several file formats. It is important to remember that correlations change over time; however, since the Euro, British Pound, and Gold are all priced in USD, the correlation is expected to remain close to its averages unless a major change happens. Remember, since spot forex is traded over-the-counter (OTC), transactions do not pass through a centralized exchange like the Chicago Mercantile Exchange.

• 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.
• None of the information contained here constitutes an offer to purchase or sell a financial instrument, or to make any investments.
• The short format shows reportable open interest and week-to-week open interest changes separately by reportable and non-reportable positions.
• 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.
• We introduce people to the world of trading currencies, both fiat and crypto, through our non-drowsy educational content and tools.

We advise you to carefully consider whether trading is appropriate for you in light of your personal circumstances. We recommend that you seek independent financial advice and ensure you fully understand the risks involved before trading. These are typically hedge funds and various types of money managers, including registered commodity trading advisors (CTAs); registered commodity commitment of traders report forex pool operators (CPOs) or unregistered funds identified by CFTC. The strategies may involve taking outright positions or arbitrage within and across markets. The traders may be engaged in managing and conducting proprietary futures trading and trading on behalf of speculative clients. Open interest held or controlled by a trader is referred to as that trader’s position.

Trading Tools

This knowledge helps a trader better decide when to put on a long or short currency position. Commodity fund managers, for the most part, plus a few of the big banks and brokers. You might think you want to follow the money managers, but remember, trend followers generally miss the turning points. The important thing you are looking for is when the position of either commercials or speculators gets proportionately large, compared to recent data, at which point the professionals think it is “extended” or overdone.

Trading

The exchanges that trade futures are primarily based in Chicago and New York. 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.

The Commitment of Traders (COT) reports provide a breakdown of each Tuesday’s open interest for markets in which 20 or more traders hold positions equal to or above the reporting levels established by the CFTC. The Commitments of Traders (COT) reports are provided by the Commodity Futures Trading Commission (CFTC). COT reports provide a breakdown of each Tuesday’s open interest for markets in which 20 or more traders hold positions equal to or above the reporting levels established by the CFTC.

THE COMMITMENT OF TRADERS (COT) REPORT

As one would expect, the largest positions are held by commercial traders that actually provide a commodity or instrument to the market or have bought a contract to take delivery of it. Thus, as a general rule, more than half the open interest in most of these markets is held by commercial traders. There is also participation in these markets by speculators that are not able to deliver on the contract or that have no need for the underlying commodity or instrument.

For the COT Futures-and-Options-Combined report, option open interest and traders’ option positions are computed on a futures-equivalent basis using delta factors supplied by the exchanges. Long-call and short-put open interest are converted to long futures-equivalent open interest. Likewise, short-call and long-put open interest are converted to short futures-equivalent open interest.

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. It is also worth noting that the only trader category that was supporting and following the price action were the small speculators. 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.

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.

COT: Speculators add further fuel to gold rally

The COT reports are based on position data supplied by reporting firms (FCMs, clearing members, foreign brokers and exchanges). 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 Form 40 and is subject to review by CFTC staff for reasonableness. CFTC staff does not know specific reasons for traders’ positions and hence this information does not factor in determining trader classifications. Note that traders are able to report business purpose by commodity and, therefore, can have different classifications in the COT reports for different commodities. For one of the reports, Traders in Financial Futures, traders are classified in the same category for all commodities.