How to Read the Commitment of Traders Report

The Commitment of Traders (COT) report provides transparency into market sentiment within futures and options markets. Published by the Commodity Futures Trading Commission (CFTC), it offers a snapshot of how different groups of traders are positioned in a specific market.

Accessing the Commitment of Traders Report

The Commitment of Traders (COT) report is released weekly by the CFTC, generally every Friday at 3:30 p.m. Eastern Time. These reports reflect market positions as of the preceding Tuesday’s closing bell. Federal holidays can sometimes delay publication by one or two days.

To access the report, navigate to the CFTC’s official website. Reports are found under the “Market Reports” or “Market Data & Economic Analysis” sections, within the “Commitments of Traders” subsection. The CFTC provides reports in various formats, including static files and a Public Reporting Environment (PRE) for customized queries and data downloads.

Several versions of the COT report are available, each categorizing market participants differently:
The “Legacy” report categorizes traders into Commercial, Non-Commercial, and Non-Reportable positions.
The “Disaggregated” report provides a more detailed breakdown, separating traders into Producer/Merchant/Processor/User, Swap Dealers, Managed Money, and Other Reportables.
The “Traders in Financial Futures (TFF)” report focuses on financial instruments like U.S. Treasuries, stocks, and currencies.
A “Supplemental” report focuses on 13 agricultural markets, categorizing traders into non-commercial, commercial, and index traders.

Key Components of the Report

“Open Interest” is a central concept in the report, representing the total number of outstanding futures or options contracts not yet settled or closed out. This figure indicates the total active contracts in a market.

The report breaks down open interest by three participant categories:
Commercials: Also known as hedgers, these are entities like producers, merchants, processors, and users of a physical commodity. Their primary motivation is to hedge existing business risks, such as protecting against adverse price movements. Their market behavior often appears opposite to the prevailing market trend, as they offset real-world exposure.
Non-Commercials: Often referred to as large speculators, these include large funds, institutions, and professional traders. Their main motivation is speculation, aiming to profit from price movements rather than hedging a physical asset. These participants are considered trend-following, increasing positions in the direction of current market momentum.
Non-Reportable Positions: This category represents the aggregated activity of smaller traders whose positions fall below CFTC reporting thresholds. This category is derived by subtracting total reportable long and short positions (from Commercials and Non-Commercials) from the total open interest.

For each category, the report details several metrics:
Long Positions: Contracts held by traders anticipating a price increase.
Short Positions: Contracts held by traders expecting a price decrease.
Net Positions: Calculated by subtracting total short positions from total long positions, indicating if a category is collectively net long or net short.
Change from Prior Week: Shows the week-over-week change in positions, highlighting recent shifts in sentiment or activity.
Percent of Open Interest: Indicates the proportion of total open interest held by each group, providing context on their market influence.

Analyzing COT Data

Analysis of the COT report often focuses on extreme net long or net short positions held by Commercials and Non-Commercials. For instance, a historically high net long position by Non-Commercials can suggest an overbought market where speculative buying may be peaking, potentially signaling a reversal. Conversely, an extreme net short position by this group might indicate an oversold market.

Large week-over-week changes in positions for each category also provide valuable clues. A substantial increase or decrease in net positions can point to a rapid shift in sentiment or a new conviction among traders. These changes can precede or confirm notable market movements.

A common analytical approach examines the relationship between Commercials and Non-Commercials. Commercial traders, due to their direct involvement with the underlying commodity, frequently take positions opposite to the prevailing trend established by speculators. For example, if Non-Commercials are aggressively net long, Commercials might build a net short position, indicating they believe the market is overextended and may soon reverse.

Analyzing divergences and convergences between the positioning of these groups and market price action is another technique. A divergence occurs when one group’s positions move counter to the market trend or another group’s positions, potentially signaling an upcoming shift. If prices are rising but Non-Commercials are reducing their net long positions, it could suggest a weakening uptrend. Conversely, convergences, where positions align with the price trend, can confirm the strength and sustainability of a market move.

Open Interest, combined with positioning data, offers additional depth to the analysis. An increasing open interest alongside rising net long positions by Non-Commercials might confirm strong speculative interest and a sustained uptrend. Conversely, a decreasing open interest could signal money flowing out of the market, potentially indicating the end of a trend. By observing these combined data points, traders can identify potential market turning points or confirm existing trends. While the COT report provides insights into market positioning and sentiment, it is not a direct trading signal. It serves as a tool to understand the collective behavior of market participants.