Commitments of Traders (COT)
Jun 02, 2023 at 10:01
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Jun 02, 2023 at 10:01
How a Commitments of Traders (COT) Report Works
What Is the Commitments of Traders (COT) Report?
The Commitment of Traders (COT) report is a weekly publication that shows the aggregate holdings of different participants in the U.S. futures market. Published every Friday by the Commodity Futures Trading Commission (CFTC) at 3:30 E.T., the COT report is a snapshot of the commitment of the classified trading groups as of Tuesday that same week.
The report provides investors with up-to-date information on futures market operations and increases the transparency of these complex exchanges. It is used by many futures traders as a market signal on which to trade.
How the Commitments of Traders (COT) Report Works
The COT report traces its history back to 1924 when the U.S. Department of Agriculture’s Grain Futures Administration issued an annual report outlining hedging and speculation activities in the futures market. In 1962, the report was published monthly. In the 1990s, the report moved to a bi-weekly publication before going weekly in 2000.
Information that is included in the report is compiled on Tuesday and verified on Wednesday before being released every Friday. The report provides the data, which is visualized in graphical form. The report is intended to help people understand the dynamics of the market. According to the U.S. Commodity Futures Trading Commission, 'each Tuesday’s open interest for futures and options on futures markets in which 20 or more traders hold positions equal to or above the reporting levels established by the CFTC.'
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.
Special Considerations
The importance of the COT cannot be overstated. It is a core data source for traders and for most academic research on pricing trends in the futures market. That said, it does have its critics and their issues with the report are justified. The biggest weakness with the COT is that, for a document meant to promote transparency, the rules governing it are not transparent.
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. Simply put, even the disaggregated data is too aggregated to be said to accurately represent the market.
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.
Types of COT Reports
As mentioned above, the COT report contains four different kinds of reports: the Legacy, Supplemental, Disaggregated, and the Traders in Financial Futures report.
Legacy
The legacy COT is the one with which traders are most familiar. It breaks down the open-interest positions of all major contracts that have more than 20 traders. The legacy COT simply shows the market for a commodity broken into long, short, and spread positions for non-commercial traders, commercial traders, and non-reportable positions (small traders). The total open interest is given as well as changes in open interest.
1
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.
Supplemental
The supplemental report is the one that outlines 13 specific agricultural commodity contracts. These are for both options and futures positions. This report shows a breakdown of open interest positions in three different categories. These categories include non-commercial, commercial, and index traders.
Disaggregated
The disaggregated COT report is another one that is commonly known by traders. It provides a deeper breakdown of the market participants, splitting commercial traders into producers, merchants, processors, users, and swap dealers. The noncommercial participants are split between managed money and other reportables.
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.
Traders in Financial Futures
The final part of the COT Report is the Traders in Financial Futures report. This section outlines different contracts such as U.S. Treasuries, stocks, currencies, and euros. As with the others, there are four different classifications in this report: dealer/intermediary, asset manager/institutional, leveraged funds, and other reportables.
The COT reports provide a breakdown of each Tuesday’s open interest for futures and options on futures markets in which 20 or more traders hold positions equal to or above the reporting levels established by the CFTC.
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.
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 COT also delineates the number of contracts involved in spreads.
How Do You Read a COT Report?
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.
Where Do You Find a COT Report?
COT reports can be obtained from the CFTC website and can be downloaded in several file formats.
How Do You Use a COT Report in Forex Trading?
Forex traders may use currency derivatives COT reports to find large net long or net short positions. These positions may signal a reversal.
What Is a Gold COT Report?
A gold COT report would tabulate the holdings in gold derivatives.
What Is the Commitments of Traders (COT) Report?
The Commitment of Traders (COT) report is a weekly publication that shows the aggregate holdings of different participants in the U.S. futures market. Published every Friday by the Commodity Futures Trading Commission (CFTC) at 3:30 E.T., the COT report is a snapshot of the commitment of the classified trading groups as of Tuesday that same week.
The report provides investors with up-to-date information on futures market operations and increases the transparency of these complex exchanges. It is used by many futures traders as a market signal on which to trade.
How the Commitments of Traders (COT) Report Works
The COT report traces its history back to 1924 when the U.S. Department of Agriculture’s Grain Futures Administration issued an annual report outlining hedging and speculation activities in the futures market. In 1962, the report was published monthly. In the 1990s, the report moved to a bi-weekly publication before going weekly in 2000.
Information that is included in the report is compiled on Tuesday and verified on Wednesday before being released every Friday. The report provides the data, which is visualized in graphical form. The report is intended to help people understand the dynamics of the market. According to the U.S. Commodity Futures Trading Commission, 'each Tuesday’s open interest for futures and options on futures markets in which 20 or more traders hold positions equal to or above the reporting levels established by the CFTC.'
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.
Special Considerations
The importance of the COT cannot be overstated. It is a core data source for traders and for most academic research on pricing trends in the futures market. That said, it does have its critics and their issues with the report are justified. The biggest weakness with the COT is that, for a document meant to promote transparency, the rules governing it are not transparent.
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. Simply put, even the disaggregated data is too aggregated to be said to accurately represent the market.
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.
Types of COT Reports
As mentioned above, the COT report contains four different kinds of reports: the Legacy, Supplemental, Disaggregated, and the Traders in Financial Futures report.
Legacy
The legacy COT is the one with which traders are most familiar. It breaks down the open-interest positions of all major contracts that have more than 20 traders. The legacy COT simply shows the market for a commodity broken into long, short, and spread positions for non-commercial traders, commercial traders, and non-reportable positions (small traders). The total open interest is given as well as changes in open interest.
1
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.
Supplemental
The supplemental report is the one that outlines 13 specific agricultural commodity contracts. These are for both options and futures positions. This report shows a breakdown of open interest positions in three different categories. These categories include non-commercial, commercial, and index traders.
Disaggregated
The disaggregated COT report is another one that is commonly known by traders. It provides a deeper breakdown of the market participants, splitting commercial traders into producers, merchants, processors, users, and swap dealers. The noncommercial participants are split between managed money and other reportables.
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.
Traders in Financial Futures
The final part of the COT Report is the Traders in Financial Futures report. This section outlines different contracts such as U.S. Treasuries, stocks, currencies, and euros. As with the others, there are four different classifications in this report: dealer/intermediary, asset manager/institutional, leveraged funds, and other reportables.
The COT reports provide a breakdown of each Tuesday’s open interest for futures and options on futures markets in which 20 or more traders hold positions equal to or above the reporting levels established by the CFTC.
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.
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 COT also delineates the number of contracts involved in spreads.
How Do You Read a COT Report?
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.
Where Do You Find a COT Report?
COT reports can be obtained from the CFTC website and can be downloaded in several file formats.
How Do You Use a COT Report in Forex Trading?
Forex traders may use currency derivatives COT reports to find large net long or net short positions. These positions may signal a reversal.
What Is a Gold COT Report?
A gold COT report would tabulate the holdings in gold derivatives.
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