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 17 saw above average volumes ranging between 17,266 contracts (on September 19) to 40,276 contracts (on September 17).  The Dec’20 and Mar’20 contracts had 70% and 18% of the volume, respectively, as of September 3.

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 57% and 25% of the open interest as of September 3.  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 17 saw fluctuating open interest, along with one large upward price move (indicated new buying on Monday, September 17) and then several small follow-up price declines.

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