Commitments of Traders (COT)

The Commitments of Traders (COT) is an important report issued by the CFTC that shows the aggregated long and short positions in the futures market regarding all major asset classes including Forex currency pairs. The COT is considered an important indicator for analyzing market sentiment and future market conditions, especially as concerns the positions of non-commercial traders.

What is the COT (Commitments of Traders (COT) Report?

The Commitments of Traders or COT is a weekly report which measures total holdings of commercial and non-commercial participants in the US futures market. The COT report was firstly issued in 1962 incorporating 13 popular agricultural commodities. Originally the report was released on a monthly basis bust starting from the year 2000 it is released on a weekly basis. The COT report is available for all actively traded Futures contracts such is stock indices, interest rates, and currencies.

■ The Commitments of Traders includes a breakdown of the total futures positions of 3 different market participants:

(1) Non-Commercial traders / large speculators

(2) Commercial Forex traders / hedgers

(3) Small speculators (too small to be reported)

■ There are COT reports for many different asset classes including:

(a) Stock Futures (equity investors)

(b) Commodity Futures (precious metals, energy, etc)

(c) Currency Futures (including US Dollar against Euro, Japanese Yen, British Pound, Canadian Dollar, Swiss Franc, Australian Dollar, Mexican Peso, Russian Ruble)

 

 

Report Release Dates

The report is released in a weekly base, every Friday at 3:30 EST and shows the aggregate commitments of traders for the prior Tuesday. For example, this is the COT release schedule for 2014.

Month	CFTC's Commitments of Traders (COT) -Calendar Dates
January	6	10	17	24	31
February	7	14	21	28
March	7	14	21	28
April	4	11	18	25
May	2	9	16	23	30
June	6	13	20	27
July	7	11	18	25
August	1	8	15	22	29
September	5	12	19	26
October	3	10	17	24	31
November	7	14	21
December	1	5	12	19	29

 

COT Report -What it can really show?

The COT report includes all net long and short positions as concerns the US futures contracts. The positions of the non-commercial traders can indicate to some extent what is the real trend of a major asset class. If most traders are long then the COT will show a bullish market bias. If most traders are short then the COT report will respectively show a bearish market bias.

 

COT Report –Participants

The COT analysis presents the aggregate positions of three types of traders:

1. Non-Commercial Futures Traders (Great Importance)

Mainly large institutional investors (investment companies, hedge funds, etc) that are trading futures contracts for speculation. Their positions are considered very important in order to define the market sentiment.

2. Commercial Futures Traders (Medium Importance)

Most companies or financial institutions using the futures market as a hedging tool against the market risk of their operations. For example, an importer based in Japan buys a futures contract to offset the risk of a future import (the risk is a strong US Dollar against the Japanese Yen).

3. Non-Reporting Futures Traders (Minor Importance)

Small traders / individual speculators. They are considered as bad traders as they usually open positions against the upcoming market trend.

Forecasting the Spot Forex Market using the COT Report Readings

The readings of the COT report should be evaluated only within a historical context. That means that evaluation is only useful by comparing the current data with past data and their influence in the spot market. Changes in the readings of the COT report may indicate upcoming changes in the real trend. The presentation of historical graphs can be used effectively for the visualization of changes in the market sentiment.

Graph: Long & Short Positions of the British Pound (GBP)

 

General COT Readings Analysis

◙ Open Interest

These are the open positions or else the aggregate number of futures and options contracts not yet offset

◙ Short Report

These are the open positions divided into reportable and non-reportable positions.

◙ Long Report

Shows the concentration of open positions held by the largest four and eight traders.

◙ Number of Traders

The total number of traders who are required to report positions to the CFTC

◙ Reportable Positions

All open positions that meet reportable requirements of CFTC, additional data is provided for commercial and non-commercial holdings, numbers of traders, spreading, changes from the previous report and percents of open interest by category.

◙ Non-reportable Positions

All open positions that don't meet reportable requirements of CFTC

◙ Spreading

Spreading measures the extent of long and short futures positions held by non-commercial traders

 

 

Related Links:

► CFTC General Commitments of Traders: http://www.cftc.gov/MarketReports/CommitmentsofTraders/index.htm

► CME Group Currency Futures COT: http://www.cmegroup.com/trading/fx/cftc-tff/main.html

► Timing Charts: http://www.timingcharts.com/

► Scotia Bank Fx Sentiment Report: http://www.gfx.gbm.scotiabank.com/Chart_Feed/IMM.pdf

 

George Protonotarios, Financial Analyst for TradingCenter.org (c)