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.  These spikes in volume happen during fund rolling periods and/or times of high price volatility.  The week ending Thursday, April 11 reflected the scheduled  Goldman and AIG fund rolls with above average volumes between 55,734 (on April 10) and 68,758 (on April 9).  On April 11 the May’19 had 44% of the volume while the Jul’19 had 42%.

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.  For example, on April 11 the May’19 and Jul’19 contracts had 15% and 41% respectively, while the more distant Dec’19 had 37%.  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 April 11, the open interest pattern declined steadily along with mostly declining price settlements.  This pattern suggests some long liquidation.

Comments are closed.