COT Gold, Silver and US Dollar Index Report - October 31, 2014
Posted Friday, 31 October 2014.
The COT
reports which we look at each week provide a breakdown of each Tuesday's open
interest for markets in which 20 or more traders hold positions equal to or
above the reporting levels established by the CFTC. The weekly reports for Futures-and-Options-Combined
Commitments of Traders are released every Friday at 3:30 p.m. Eastern
time. The short report shows open
interest separately by reportable and Non-reportable positions. For reportable positions, additional data
is provided for commercial and non-commercial holdings, spreading, changes
from the previous report.
Futures and Options Combined
What does this title mean?
A future is a standardized contract traded through regulated exchanges
where an investor buys or sells a contract at a specified price for a
specific date in the future. The
price includes the interest charge due to the seller by the buyer from the
date of the contract to the due date.
An option is the ‘right to buy or sell’ a contract at a fixed date in
the future at a specific [strike] price.
The difference is that a futures contract is an agreement to buy or
sell, whereas an option gives the holder the
right to buy or sell. An option
holder can decide not to take up that right and will only lose the cost of
buying the option. His loss is
therefore definable at the start of his investment, while the potential
profit has not limit to it. A futures
contract is usually leveraged [a loan provided] up to 90% of the
contract. However, with the owner
liable to top up his ‘margin’ to maintain this 10% his potential losses can
rise far higher than his investment. A
‘long’ [buying] contract limits its loss to the full price of the item,
whereas the ‘short’ [selling] contract has no limit except the height that
the price of the item can rise to.
The Commitment of Traders report [COT] is therefore a report on
the overall position of the Commodity Exchange [COMEX or NYMEX].
Large & Small Speculators
The word “speculator” implies that the person is simply making a
bet on the way he thinks the price of the item is going to move. In essence, he is a gambler. A trader might be this, but then again he
might be an Arbitrageur, buying in one market and selling in another to
capture the price difference between the two. He wants to deal as fast as possible so as
to minimize his risk of a price movement while he is exposed. We would not put him in the same category
as a speculator.
Contract
One contract is 100 ounces of gold, or 5,000 ounces silver. The numbers referred to above are
therefore the number of contracts in that position. The net long speculative position is found
by adding the large and small speculators bought contracts and deducting the
large and small speculators sold contracts.
We work on there being 32,150 ounces in a tonne.
Buy [Long]
A long position is where an investor, trader, speculator buys
100 ounces x the number of contracts.
Sell [Short]
A short position is where an investor, trader, speculator sells
100 ounces x the number contracts.
Spreading
For the options-and-futures-combined report, spreading measures
the extent to which each non-commercial trader holds equal combined-long and
combined-short positions. For example, if a non-commercial trader in Gold
futures holds 2,000 long contracts and 1,500 short contracts, 500 contracts
will appear in the "Long" category and 1,500 contracts will appear
in the "Spreading" category.
Open Interest
Open interest is the total of all futures and/or option
contracts entered into and not yet offset by a transaction, by delivery, by
exercise, etc. The aggregate of all long open interest is equal to the
aggregate of all short open interest.
Reportable Positions
Clearing members, futures commission merchants, and foreign
brokers (collectively called "reporting firms") file daily reports
with the Commission. Those reports show the futures and option positions of
traders that hold positions above specific reporting levels set by CFTC
regulations.
Commercial and Non-commercial
Traders
When an individual reportable trader is identified to the
Commodities Futures Trading Commission, the trader is classified either as
"commercial" or "non-commercial." All of a trader's
reported futures positions in a commodity are classified as commercial if the
trader uses futures contracts in that particular commodity for hedging as
defined in the Commission's regulations (1.3(z)).
Non-reportable Positions
The long and short open interest shown as "Non-reportable
Positions" are derived by subtracting total long and short
"Reportable Positions" from the total open interest. Accordingly,
for "Non-reportable Positions," the number of traders involved and
the commercial/non-commercial classification of each trader are unknown.
Changes in Commitments from Previous
Reports
Changes represent the differences between the data for the
current report date and the data published in the previous report.
Number of Traders
To determine the total number of reportable traders in a market,
a trader is counted only once regardless whether the trader appears in more
than one category (non-commercial traders may be long or short only and may
be spreading; commercial traders may be long and short). To determine the
number of traders in each category, however, a trader is counted in each
category in which the trader holds a position. Therefore, the sum of the
numbers of traders in each category will often exceed the "Total"
number of traders in that market.
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