Hi ForExchange,
Hi ForExchange,
Sorry for my late answer, but I’m usually out for the weekend
As I see you are look at the disaggregated cot report. Since it does not have such a long history (+ the too many categories messes you up a bit), I’d recommend that you analyze the classical cot report (some people may call it the legacy report). You can have a look at it here: CFTC Commitments of Traders Report - NYME (Futures Only)
Here I can explain, why the net values are negative or positive but at the same time if you add up all, you get 0. Just concentrate on the colored boxes. I used the colors the same as on the GBP chart I posted earlier --> Green: They are the non-commercials, but most people, who view the cot report regularly, simply call them: LARGE SPECULATORS (LS). Red: COMMERCIALS ©. Blue: Non-reportables, they are SMALL SPECULATORS (SS). The difference between LS and SS is the size with which they trade. Above a specific level, you need to report towards CFTC. Since these are pretty high levels, we can guess that these Traders are actually really LARGE players in the markets (like hedge funds…). SMALL speculators do not reach these levels, they are generally individual investors (like you and me:)).
If you calculate the net positions for these players, this is what you get:
LS: 507592-97384= they are long 410208 contracts.
C: 491241-920424= they are short 429183 contracts.
SS: 99092-80117= they are long 18975 contracts.
Adding these up (410208-429183+18975) you get 0.
I trade both, commodities AND currencies. I also trade OPTIONS on futures!! Yes, options. I think they are great instruments for long term trading. If you think about it, a cot extreme may exist for many weeks before prices react to the signal. Instead of taking large risks by using wide stops, it could be a solution to enter an option trade. There are two ways that may work (and now I am not go’na go into complicated options strategies – cause there are a few:) just two simple cases) 1) Buying: let’s say there is a huge, close to all time or maybe even all time cot extreme in a market, a bullish one. You know that prices will eventually bottom, but who knows, the decline may go on for a couple more weeks. In this case you can buy a CALL option with a strike price that you consider: it can be reached by price in a certain time (certain time: should be the expiry date of your option), I’d say 2-3 months to be sure. If prices do bottom out in let’s say 3 weeks , but then the rally erupts and you see prices rocketing towards your strike, during the 2-3 months of your option’s life time, prices may even go much further! Your Risk is fixed (the price you payed for the option) and your profit (in case you wait for the option to expire) is the intrinsic value (Spot price – Strike price) of your option. 2) Selling options: This is a riskier strategy, since theoretically you are taking unlimited risk… well there are hedging possibilities and of course you can use stops here as well, but I agree, you need to be more careful with selling options… Anyhow, just so you see the this strategy: to stick to our example… having this huge cot extreme in the market, you are pretty sure that prices will not go any deeper from where they are standing. You can start selling (I would say – because of the risk issue – OTM (out of the money)) PUTS, probably ones that will expire soon (a few weeks), but there could be option traders reading this who would argue that it is better to sell options with more time value… Your question may be: Ok, but what’s my reward: If prices start rallying as you predicted, your option will lose it’s value very fast. Since you sold the option, that’s good for you!
I’m not saying that option trading IS the only way, but it is definitely an alternative that I think you should consider one day.
Yes, I am a subscriber, but it has a free part, where all cot charts can be seen yearly charts). I wouldn’t say it is costly service at all… if you think about it’s about two commission a month!! If you do trade regularly (and especially if you are a daytrader!!) Absolutely worth it!
All the best,
Dunstan