COT Report - March 29, 2013

The COT reports which we look at each week providea breakdown of each Tuesday's open interest for markets in which 20 or moretraders hold positions equal to or above the reporting levels established bythe CFTC.   The weekly reports forFutures-and-Options-Combined Commitments of Traders are released every Fridayat 3:30 p.m. Eastern time.   The shortreport shows open interest separately by reportable and Non-reportablepositions.   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 exchangeswhere an investor buys or sells a contract at a specified price for a specificdate in the future.   The price includesthe interest charge due to the seller by the buyer from the date of thecontract to the due date.   An option isthe ‘right to buy or sell’ a contract at a fixed date in the future at a specific[strike] price.   The difference is thata futures contract is an agreement to buy or sell, whereas an option gives theholder the right to buy orsell.   An option holder can decide notto take up that right and will only lose the cost of buying the option.   His loss is therefore definable at the startof his investment, while the potential profit has not limit to it.   A futures contract is usually leveraged [aloan provided] up to 90% of the contract.  However, with the owner liable to top up his ‘margin’ to maintain this10% his potential losses can rise far higher than his investment.  A ‘long’ [buying] contract limits its loss tothe full price of the item, whereas the ‘short’ [selling] contract has no limitexcept the height that the price of the item can rise to.

The Commitment of Traders report [COT] is therefore a report onthe overall position of the Commodity Exchange [COMEX or NYMEX].

Large& Small Speculators

Theword “speculator” implies that the person is simply making a bet on the way hethinks the price of the item is going to move.  In essence, he is a gambler.   Atrader might be this, but then again he might be an Arbitrageur, buying in onemarket and selling in another to capture the price difference between thetwo.   He wants to deal as fast aspossible so as to minimize his risk of a price movement while he isexposed.   We would not put him in the samecategory as a speculator.

Contract

Onecontract is 100 ounces of the commodity [gold or silver in this case].   The numbers referred to above are thereforethe number of 100-ounce contracts in that position.   The net long speculative position is foundby adding the large and small speculators bought contracts and deducting thelarge and small speculators sold contracts.  We work on there being 32,150 ounces in a tonne.

Buy[Long]

A longposition is where an investor, trader, speculator buys 100 ounces x the numberof contracts.     

Sell[Short]

A shortposition is where an investor, trader, speculator sells 100 ounces x the numbercontracts.

Spreading

For theoptions-and-futures-combined report, spreading measures the extent to whicheach non-commercial trader holds equal combined-long and combined-shortpositions. For example, if a non-commercial trader in Gold futures holds 2,000long 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

Openinterest is the total of all futures and/or option contracts entered into andnot yet offset by a transaction, by delivery, by exercise, etc. Theaggregate of all long open interest is equal to the aggregate of all short openinterest.

Reportable Positions

Clearingmembers, futures commission merchants, and foreign brokers (collectively called"reporting firms") file daily reports with the Commission. Thosereports show the futures and option positions of traders that hold positionsabove specific reporting levels set by CFTC regulations.

Commercial and Non-commercial Traders

When anindividual reportable trader is identified to the Commodities Futures TradingCommission, the trader is classified either as "commercial" or"non-commercial." All of a trader's reported futures positions in acommodity are classified as commercial if the trader uses futures contracts inthat particular commodity for hedging as defined in the Commission'sregulations (1.3(z)).

Non-reportable Positions

The long and short open interest shown as "Non-reportablePositions" 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 thecommercial/non-commercial classification of each trader are unknown.

Changes in Commitments from PreviousReports

Changes represent the differences between the data for the currentreport date and the data published in the previous report.

Number of Traders

To determine the total number of reportable traders in a market, atrader is counted only once regardless whether the trader appears in more thanone category (non-commercial traders may be long or short only and may bespreading; commercial traders may be long and short). To determine the numberof traders in each category, however, a trader is counted in each category inwhich the trader holds a position. Therefore, the sum of the numbers of tradersin each category will often exceed the "Total" number of traders inthat market.