CHAPTER 23
The Commitments of Traders Report
The Commodity Futures Trading Commission (CFTC) produces the Commitments of Traders Report (COT). It can offer valuable tidbits of information, though its overall usefulness has diminished with the explosion in over-the-counter (OTC) derivative trading in commodities and currencies.
The report breaks down the open interest in each commodity, currency, and financial futures contract, detailing information relating to positions held, long and short, by commercial accounts, large speculator accounts, and small speculator accounts.
The general wisdom is that large money is smart money, representing the sharks; and small money represents the fish on which the sharks feed. Thus, when the large speculative accounts and the small speculators are on opposite sides of the market, the trend is often pushed in the direction that hurts the small traders.
By nature, the commercial accounts and the speculative accounts should combine to have offsetting exposure from the long, short, and spread position perspectives.
Again, in contrast, speculators are said to be the shallow-pocketed trade, whereas the commercial accounts have deep pockets because they are most often hedging price exposure in the physical market.
In the case of precious metals, the commercial accounts are represented by bullion banks, mining companies, and industrial consumers, to name a few of the primary players.
In general, commercial accounts are believed to be the most “in the ...

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