Volume and Open Interest

The current allocation of volume, open interest, and a lot more cotton futures information, can be found on the ICE futures website under “Featured Reports”.  Volume (viewed above as the green line) is defined as the total daily number of contracts traded in a session. The level of volume is often used to gauge the strength of continuing or changing trends. Typical cotton daily volume bounces around between 10,000 and 25,000 contracts.  The graph above shows numerous instances of volume spiking above 50,000 contracts in the last several years.  For the week ending Thursday June 22,   ICE cotton saw above average volumes between 22,860 contracts (on Tuesday) to two days with volumes exceeding 40, contracts (June 16 and 22).  On June 22 about 70% of the volume was concentrated in the most active Dec’17 contract, with another 12 % in the Mar’18.

Open interest (the red line above) refers to the number of active positions at the end of the day (not double counting both the buyer and seller). The pattern of open interest is somewhat similar to volume, except that it continues to shift from the front month.  Four weeks ago the open interest in the Jul’17 was 46% of the total, but it dropped to 17% as of June 14 and 2% by June 22.  The Dec’17 had 78% of the total open interest as of June 22.   Open interest does not fluctuate as much as daily volume, but there are patterns where sharp surges or declines in open interest are associated with sudden rallies or sell-offs (often accompanied by spikes in volume).  For the week ending June 22, the level of open interest was steadily declining.  Price settlements were also gradually declining over the same period, suggesting continued long liquidation.

Comments are closed.