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, March 4 saw above average volumes between 27,092 (on March 2) to 52,647 contracts (on February 26).  The May’21, and Jul’21 contracts had 54% and 29% of the volume, respectively, as of March 4, while the more distant Dec’21 had 15%.

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 May’21 and Jul’21 had 45%, and 24% of the open interest, respectively, as of March 4, while the Dec’21 contract had 25%.  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 March 4 saw open interest in a downtrend, along with downtrending price settlements.  This pattern suggests long liquidation.

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