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.  Despite the proverbial “dog days of August”, the week ending Thursday, August 4  saw average volumes between 15,171 contracts (on August 4) to 25,764 contracts (on August 1).  The Dec’22, and Mar’23 contracts had 66% and 25% of the volume, respectively, as of August 4.

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’22 and Mar’23 contracts had 57%, and 20% of the open interest, respectively, as of August 4.  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 in high volume).  Across the week ending August 4, open interest was mixed, along with a mixed pattern of futures price settlements.

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