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CFTC’s Commitments of Traders Report

May 04
03:48 2011

Each week, you can get a snapshot of who is doing what in the futures markets by analyzing the Commitments of Traders Report (the COT) from the Commodity Futures Trading Commission (the CFTC). Historical analysis of the COT can lead to better understanding of how the futures markets behave, and importantly, can give you valuable trading ideas for the future.

The CFTC is responsible for regulating all the trade in futures and options that goes on in U.S. exchanges. So they need to keep track of how large each traders’ positions are getting in each market, to be sure they are not exceeding the limits. Forensic study of that kind of data also helps the CFTC crack down on fraud in the futures and options markets. The public doesn’t get to see individual traders’ positions, but the aggregate effect of all traders’ positions is summed up and released each Friday afternoon in the form of the Commitments of Traders report.

The COT is released in several iterations: one for each U.S. futures exchange, one for all agriculture commodity futures and options, one for all petroleum-based futures and options, one for all natural gas and products, one for electricity, one for metals and “other,” and one for financials. Each of these has further breakdowns of a report with just the futures positions, or a report with both futures and options positions reported. They’re also released as either a long format or short format report. To give you an idea of the hugely vast quantities of data each report contains, imagine all these markets, each with a data set for total open interest, and the long and short positions of hedgers, swap dealers, speculators, and “other reportables.” The data is given as the raw number of positions held by each, as well as the change from the previous week, the percent of open interest represented by each category of trader, the number of traders in each category, and even further breakdowns. Years and years of all the data contained in these reports is freely available to the public.

It is an astounding amount of raw data to process, but if an analyst can wrap his mind around it, he can coax meaning from it. For instance, one can determine whether there is seasonality to one category of trader’s participation in a certain market, or how well correlated the proportion of speculative traders is to overall price movement. Even without heavy statistical number crunching, the COT reports can be used to give you an idea of how “the smart money” is moving their investments around, even though it’s a delayed snapshot of that activity.

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