The Commitments of Traders report (COT), is a weekly report published by the U.S. Commodity Futures Trading Commission (CFTC). The COT report is based on data collected from the futures contracts traded on regulated exchanges within the United States. It categorises traders into three main groups.
Commercial Traders: These are typically hedgers who use futures contracts to offset their price risk in the physical market. They include producers, manufacturers, and other commercial entities who have a direct interest in the underlying commodity. Commercial traders’ positions can provide insights into the supply and demand dynamics of the commodity.
Non-Commercial Traders: These are often referred to as speculators and include large institutional investors, hedge funds, and individual traders who trade futures contracts for speculative purposes. Non-commercial traders’ positions can indicate market sentiment and potential trends.
Non-Reportable Traders: This group consists of small traders or traders who do not meet the reporting thresholds set by the CFTC. Their positions are aggregated and reported as a single category.
The COT report provides a breakdown of the positions held by these trader groups, showing the number of contracts held long (bought) or short (sold) in each futures market. It also presents the changes in these positions compared to the previous reporting period. The report distinguishes between futures contracts held for speculative purposes and those held for hedging purposes.
How to use the COT report
One very simple way of using the COT report is to look for market extremes. Ideally, you want to see a report where the market is heavily positioned in one direction. If some news breaks in the week which contradicts this market positioning, then many of those traders are underwater and will be closing their positions. This will only add to the current news shift and will likely create an explosive one-directional price move. Here is an example of the report as displayed by the Financial Source Team for the USD at the start of June.
Insert FS COT report
The Commitments of Traders report (COT) is publicly available and can be accessed for free from the U.S. Commodity Futures Trading Commission (CFTC) website. The CFTC publishes the COT report on a weekly basis, typically on Fridays, with data reflecting positions held as of the preceding Tuesday.