COT Report Data 05 25 2010

To Subscribe to alerts when a new COT report is published (weekly) click here and choose "subscribe" on the weekly COT alerts field, and click to update your existing account or register a new one.

Data and Analysis for Most Recent Release

Legend:	Net Long	Net Short	Position Change

Overview: Data for 05 25 2010  Open interest declined for the period by 19,448 contracts with most of the liquidation in the euro.  As we approach the expiration of the June contract, a reduction in the open interest (OI) is to be expected.  June options also expire and the OI in the options is very big in the euro and the pound.

The total number of contracts long the USD or short something else and by default long the dollar increased this past week, from 161,400 contracts to 181,634 contracts.  The USD long was extended by specs getting shorter in the euro and the pound,  In the commodity currencies the specs sold out their longs in the A$ the C$ and the NZ$ which decreased their dollar short.  There was a sizable reduction by yen traders in their short yen long dollar positions.

There is big spreading in options for the euro and the pound.  We would suspect that the big players are active writing both puts and calls to take advantage of time and volatility decay.  In some cases there is probably active selling of covered puts and calls.

Small specs have been reducing the size of their commitments.  The biggest small spec long position remains in the C$ at 30.6% of the OI, followed by a 20.2% long in the A$, and a 18.5% market position in the SF.  The largest small spec short positions are in the SF 35%, the yen 21.6% and the pound at 20.7%.  In futures only the small spec pound position is up to 23.1% of the OI.

The biggest large spec long positions remain in the NZ$ and the DI at 63.9% and 61.9% respectively.  The largest big spec short positions were in the SF 44.8%, the pound 46.2% and the euro 34.1%.  If we consider futures only, the big specs are short 56.9% of the pound and 54.0% of the euro.  This show how active the big players are in offsetting their futures positions with options.

			(1) Large Traders		(2) Small Traders		(3) Commercial
		Total OI	Long	Short	Long	Short	Long	Short
USD Index	Contracts:	41,080	25,426	2,889	5,480	2,188	6,026	31,885
	Change:	-1,613	-2,441	112	176	-219	-484	-2,642
	% Open Interest:		61.9	7.0	13.3	5.3	14.7	77.5
	Analysis:	There was a small decline in the OI as the large traders reduced their longs.  They remain close to a 9 to 1 long and still own 61.9% of the OI.  Small specs are not big players in this market but are a 2.5 to 1 long.
EUR	Contracts:	409,675	47,525	139,608	56,616	67,716	212,710	109,528
	Change:	-21,586	-14,069	-12,670	-4,376	-4,714	-4,034	-5,069
	% Open Interest:		11.6	34.1	13.8	16.5	51.9	26.7
	Analysis:	The OI was reduced by 5% during the week as both size speculators modestly reduced their positions. The large spreads remain about a 3 to 1 short in the euro, while the small spec is only a modest short.    Spreading is 22.7% of the long form  OI that includes options, but when options are excluded spreading is only0.7% of the total.  The long form shows the total OI 409,675 contracts, but the futures only is only 281,966.  This means there are massive option position in the euro on both sides of the market which shows up in the spreading activity.  Large traders are likely to be sellers of option premium to take advantage of time decay and declining volatility.  Total contracts according to the May 28th preliminary report was 469,177.
GBP	Contracts:	182,707	11,035	84,434	16,400	37,734	133,274	38,540
	Change:	874	327	-1,783	-3,338	504	2,191	460
	% Open Interest:		6.0	46.2	9.0	20.7	72.9	21.1
	Analysis:	There were only modest changes in the pound OI during the week.  Large specs remain 7.5 to 1 short the market and 46.2% of the total.  The small spec decreased his long by 3338 contracts and increased his short.  He is now a little better than a 2 to 1 short.  Like the euro, spreading is big in the pound representing  12% of the OI in the futures and options combined long form report but onlt 0.5% in the futures only report.  The preliminary option report of last Friday May 28th 107,663 total options contracts open.
JPY	Contracts:	161,889	32,069	40,449	22,785	35,034	93,502	72,873
	Change:	3,940	10,571	-14,596	5,752	197	-16,040	14,681
	% Open Interest:		19.8	25.0	14.1	21.6	57.8	45.0
	Analysis:	There was little change in the aggregate total of the yen, but there were sizable position shifts.  Large specs who had been big on the short side of the yen, remained short but narrowed that position by a little over 25,000 contracts.  The small specs reduced their short yen position buying 5752 contracts.
CHF	Contracts:	53,735	11,125	24,075	9,928	18,811	28,439	6,605
	Change:	897	660	-1,074	-72	-148	-669	1,141
	% Open Interest:		20.7	44.8	18.5	35.0	52.9	12.3
	Analysis:	There was not a lot of movement in the Swissy for the period.  Speculators remain on the short side of the SF by a little better than a 2 to 1 ratio.  Small specs have a high percentage of the short side of this market.
CAD	Contracts:	144,682	40,762	13,025	44,075	19,078	49,434	102,169
	Change:	3,721	-13,475	5,872	1,776	1,033	10,660	-7,944
	% Open Interest:		28.2	9.0	30.5	13.2	34.2	70.6
	Analysis:	Despite several sells offs during the period, presumed to be long liquidation, the OI went up a modest 3721 contracts.  The large trader presumed to be funds did reduce his net long by over 19000 contracts which the commercial bought.  The small spec remains undaunted, long over 30% of the OI.
NZD	Contracts:	17,760	11,342	3,680	1,073	1,991	5,345	12,089
	Change:	-3,597	-5,398	-507	-1,373	102	3,174	-3,192
	% Open Interest:		63.9	20.7	6.0	11.2	30.1	68.1
	Analysis:	The large specs finally reduced some of the big long they have been lugging for months.  They reduced the long by almost 5000 contracts but remain long 63% of the total.  Small spec flipped their position to the short side.
AUD	Contracts:	121.027	40,110	20,107	24,403	19,280	48,597	73,722
	Change:	-1,364	-10,511	7,197	-4,158	81	9,563	-12,384
	% Open Interest:		33.1	16.6	20.2	15.9	40.2	60.9
	Analysis:	The large spec reduced his net long by over 17000 contracts during the period, down to a mere 2 to 1 long.  Small specs followed and sold 4158 of their longs.  This market has undergone a big liquidation, and is now getting close to even.

*Source: CFTC (Commitments of Traders with Delta-adjusted Options and Futures Combined) Actual Report

Commitment of Trader (COT) Report: Every Friday the CFTC releases data about futures/options trading activity by market segment in various markets including currencies.  Positions for each currency are classified into 3 groups: large speculators, small speculators, and commercial traders.  If interpreted correctly this data can be useful in forecasting price trends in the spot forex market.  The table below contains a condensed version of currency trader?s collective market votes.  Interpretation of this data is definitely an art rather than a science.  With that caveat, you may view the latest COT analysis for each currency in the analysis fields of the table below.  *See below for definitions and additional information about the COT Report and analysis.

The CFTC breaks open futures contracts into reportable positions and non reportable positions.  Reportable positions are further broken down into commercial and non-commercial positions.  Though commercial reportable positions may be a very large portion of the open interest, the commercials activity in the futures market is an adjunct to other business activity.  There may indeed be speculating in some cases, but they may also be responding to many factors such as manufacturing, purchase and sales of products, or investment overseas, or repatriation of capital or profits from abroad.  Or they may be banks hedging their overseas loans or currency positions.  As hedgers they may be more concerned with futures as an insurance policy than a profit center.

While price movement is not the major concern of the commercial user, it is the lifeblood of the large and small trader.  It is for that reason that we analyze the activities of the speculators in detail and ignore the commercials positions.

Reportable positions are usually held by the wealthy experienced successful traders and or a combine of participants.  That does not mean that their every trade is a winner. However to hold a reportable currency position is not for the faint of heart and requires a well funded account and probably a friendly banker.  Non reportable positions are those of the smaller trader.  Conventional wisdom says the little guy is generally on the losing side of the market.  Naturally there are exceptions to all rules, but both groups are responsive to price action.

How to use COT Report:  There are 3 main ways the COT report is used to forecast price trends in the spot forex market.

1)  Extreme Positions:  If everyone is already long or short it is a strong indication price may reverse because there is no one left for buyers to buy from and no one left for sellers to sell to.

2)  Changes in Market Positions: When large speculators change their position and go from net long to net short or vice versa, there typically is a good reason they do this.

3)  Changes in Open Interest: Rising or falling open interest may reflect directional commitment or lack thereof and therefore indicate strength or potential reversal of a particular price trend.

Terminology & Types of Traders:

a)  Non-Commercial Reportable Traders: (Large Traders) Large speculators, also referred to as large spec, whose position size requires reporting to the CFTC

b)  Nonreportable Traders: (Small Traders) Typically smaller speculators, also referred to as small spec, whose position size does not require reporting to the CFTC.

c)  Commercial Reportable Traders: (Commercial Traders) Traders engaged in business activities hedged by the use of the futures or option markets.

d)  Open Interest (OI):  Open interest, also referred to as OI for short, is a trade, long or short, that has not yet been offset or closed out.  For every long, there is a short.  Every buyer must find the price at which a seller will sell.  Day traders who get in and out on the same day do not add to the OI.

e)  Net Short and Net Long: In the case of Net Long, a particular market segment (i.e. large speculators) has more long positions with open interest than short positions.  The opposite applies to Net Short.

Click here for previous COT Analysis Postings  |  Click here for CFTC page about the COT Report