Trading in general requires working knowledge of the moves of other traders and market participants to determine when there’s action to be taken. To achieve this level of awareness and understanding, traders need reliable access to timely, in-depth market data that clearly illustrates the latest changes in market positions.
What is the Commitment of Traders (COT) Report?
Conducted by the Commodity Futures Trading Commission (CFTC), the Commitment of Traders Report details the open interest in each futures and options on commodities markets containing 20 or more traders holding position sizes large enough to meet the CFTC’s reporting level. The report allows traders additional visibility into the positions of the big players in virtually any asset class by showing about 70-90 percent of open positions in futures markets.1
The purpose of this report is to provide some transparency regarding the open interest in various futures markets and the sizes of those positions for different groups of traders. Open interest is the total number of open futures or options positions that are not closed or finalized on a particular day. The COT Report is important for traders to understand because it can reflect when different groups of traders have a more bearish or bullish outlook in a market; it displays the number of long and short positions a group has in a market and how these position sizes vary week to week.
How Does the Commitment of Traders (COT) Report Work?
The COT Report is released every Friday and is based on data at the end of the prior Tuesday’s trading session. Ultimately, the COT Report is an excellent resource to use in order to gain insight into the position sizes of different types of traders and how the position sizes change over time.
The COT Report is separated into five categories to differentiate the types of traders who have positions in a market, and three sub-categories to differentiate the types of positions. The COT Report also breaks down four statistical categories.
Trader Categories
The five types of traders include:
- Processors/Users: Processors or users are traders who use the futures markets as a hedge to the physical commodity in the cash market. These traders include producers of the commodity, consume mass quantities of the commodity, or trade the commodity in the cash market.
- Swap Dealers: Swap dealers, as defined by the CFTC, is “an entity that deals primarily in swaps for a commodity and uses the futures markets to manage or hedge the risk associated with those swaps transactions.” In other words, swap dealers are typically traders who take the other side of trades for hedgers and large speculators.
- Managed Money: These traders are commodity trading advisors (CTAs), commodity pool operators, or hedge funds that hold large speculative positions in the futures.
- Other Reportable: Traders outside of the three categories listed above that have substantial positions in a market, as defined by the CFTC.
- Non-Reportable: Traders outside of the first three categories listed above that have small positions, as defined by the CFTC, in a market.
Position Categories
The three sub-categories of positions include:
- Long: This is the number of traders that are long the market.
- Short: This is the number of traders that are short the market.
- Spreading: This represents the number of offsetting positions in a particular trader category.
Note: Long and short represent any remaining positions after offsetting.
Statistical Categories
The four statistical categories include:
- Position size
- Changes in position size from the previous week
- Percent of open interest represented by each category of trader
- Number of traders in each category
A Note About the COT
The COT is a fundamental data source not only for traders but also for much of the academic research surrounding futures market pricing trends. Despite its vast applications and use cases, COT data is regarded as questionable or somewhat limited by many traders because the rules governing it lack transparency.2 However, it’s unlikely that more appropriately aggregated data will be available anytime soon, and access to some data is certainly better than no visibility at all.
What Are the Different Types of COT Reports?
There are four parts, or types of reports, that make up the COT Report:
Legacy Report
The legacy report is often considered the original COT, as this is the type with which traders are most familiar. This report is essentially an overview of the market, offering insights into the open interest of key participants and categorizing traders into one of the following three categories (as detailed above):
- Commercial traders
- Non-commercial traders
- Non-reportable positions
Supplemental Report
The supplemental COT is slightly more granular than the legacy report, providing a snapshot of the 13 agricultural commodities, including both options and futures positions. This report genre breaks down the current open interest in major agricultural products (e.g., wheat, corn, soybeans, livestock) into three categories:
- Commercial traders
- Non-commercial traders
- Index traders
Disaggregated Report
The disaggregated report, also well known to most traders, further breaks down commercial market participants into several categories: producers, users, merchants, and swap dealers. Non-commercial traders are split between the other reportables and managed money categories.
Believed to be a result of the criticism surrounding legacy COT data, the disaggregated report offers a more comprehensive view of what participants actually think about the market as opposed to those with profit motivations or speculators.
Traders in Financial Futures (TFF) Report
Lastly, the TFF report provides data specifically about futures market contacts, including interest rates and contracts involving different currencies. The category breakdown is as follows:
- Dealer/intermediary
- Asset manager/institutional
- Leveraged funds
- Other reportables
How Do You Read a COT Report?
The COT Report depicts large players’ level of commitment to long or short positions within each currency pair. Most participants will translate the data from the report into a COT chart or graph to more easily determine trends. Many traders use the COT graph to identify dramatic net long or net short positions, because these changes can indicate an approaching market reversal.
The main objective that traders look for in the COT Report is the long and short positions that different groups of traders are holding and how they compare to past COT data. For example, if there is an all-time high of long positions in the corn market for managed money, this would be a great indicator that large speculators in the corn market are extremely bullish. It is also an indicator for contrarians that a short opportunity may be developing if all the longs find reason to exit the market over a short period of time. In the end, there are many ways to decipher the COT Report for traders to gain an edge in the market.
Where Do You Find the COT Report?
The CFTC website publishes and hosts the original COT Report weekly every Friday at 3:30 p.m. ET. Public entities like Barchart also offer access to more interactive versions of the report.
To access the COT report on the CFTC website, navigate to their home page and hover over “Market Data & Economic Analysis” in the main navigation bar at the top. From there, select “Commitment of Traders.” The next page will allow you to view the COT Reports with choices to filter the data by Market Sector and Exchange and to choose whether you would like to view the data in a long or short format. Traders also have the ability to view past COT Report data and learn more about the meaning of the COT Report using the “Commitments of Traders” sidebar links on the left hand side of the page.
What Other Resources Exist for Traders to Gain Additional Insight?
Ultimately, the Commitment of Traders Report is an excellent resource that traders may use in order to gain insight into the position sizes of different groups of traders. Plus, the COT report allows traders to see how these position sizes vary over time.
You’re well aware by now that no trading strategy is guaranteed, but knowing how to think like a technical trader and analyze the markets can significantly increase your chances of a return. Know when there’s action to be taken, and how to take it, by downloading our free guide: 10 Rules For Technical Futures Trading.
