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 daily 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, September 23 saw above average volumes between 18,015 (on September 22) to 55,352 contracts (on September 20, the day of the big spec sell-off).  The Dec’21, and Mar’22 contracts had 61% and 24% of the volume, respectively, as of September 23.

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’21 and Mar’22 had 51%, and 27% of the open interest, respectively, as of September 23.  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 September 23 saw a large decline in open interest on Monday, September 20 with speculative selling.  Open interest then stabilized as futures prices recovered back into the longstanding lower 90s range.

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