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 August 17,   ICE cotton saw mostly average volumes between 16,002 contracts (on August 17) to 29,512 contracts (on August 11).  On August 10 about 73% of the volume was concentrated in the most active Dec’17 contract, with another 22% 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.  Open interest by contract has a similar pattern to volume in that the Dec’17 had 66% of the total while the Mar’18 had 24%, circa August 17.   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 August 17, the level of open interest fluctuated lower, then slightly higher.  Most active futures settlement over the same period had a gradually declining pattern, with no clear implication in relation to the open interest and volume patterns.

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