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 week ending Thursday, July 9 saw continued lower than average volumes ranging from 19,941 contracts (on Monday July 6) to 22,987 contracts (on Thursday July 9).  The Dec’20 and Mar’20 contracts had 70% and 16% of the volume, respectively, as of July 9.

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). Open interest by contract has a similar front month concentration as does volume, e.g., The Dec’20 and Mar’20 had 69% and 14% of the open interest as of July 9.  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).  The week ending July 9 saw increasing open interest in concert with increasing price, albeit in relatively low volume.

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