What is the Commitments of Traders Report and How Can It Be Used?

The U.S. Commodity Futures Trading Commission (CFTC) releases the weekly Commitments of Traders report each Friday to the public. This report shows the open positions of large non-commercial traders (commodity funds), commercial traders (normally hedgers), and non-reportable positions (small speculators) in the futures and options market. It also displays the net change of these positions from the previous week.

Traders can use this report to gauge recent market sentiment and look for possible turning points if one market segment is holding a large net position in the market. For example, if non-commercial traders are holding a large net long position in Sugar one week, and then the following week the position decreases, we can assume that the commodity funds are liquidating their long positions, and it's quite possible that a change in market sentiment may be at hand.

For example, for the week ending October 25th, 2005, the COT report showed a combined futures and options net short position in the Corn market of 19,417 contracts for non-commercial traders. The net change portion of the report represents an additional 4,341 contracts added to the short side. Knowing this information, traders can look for an opportunity to get long the Corn market on any rally, as there could be some potentially heavy buying interest by these non-commercial traders to liquidate their short positions and possibly reverse their positions to the long side.

For more information on the Commitment of Traders report please feel free to contact XPRESSTRADE.