Welcome to illuminati silver, we tell you
the truth about silver. Today is Thursday 20th September 2018 and
we are providing a brief but we hope useful guide to the COT Report – what does it mean,
how does it work and is it at all useful. As this subject can become rather technical,
and potentially laborious, we have split this training into 2 parts. Part 1 which is this
video=- which basically provides the definitions, what the report looks like and an over all
guide to what the various parts and aspects of it means.
Part 2 which will be published Saturday will be how one can interpret the report, use it
to make better and potentially more accurate decisions and some of the factors to both
avoid and to take advantage of. A more detailed and thorough analysis of the
COT report will be published within the Inner Sanctum when it is launched on 1st November,
however we are confident that for most people what you learn here will be ample unless of
course you are a day trader or wish to specialise in the futures market.
OK COT what does it stand for? COT stands for Commitment of Traders Reports
and is published by The Commodity Futures Trading Commission (or CFTC) which enumerates
the holdings of participants in various futures markets in the United States.
Specifically, the COT reports provide a breakdown of each Tuesday’s open interest for futures
and options on futures markets. The data is gathered at the close of business on a Tuesday
and is published on Friday afternoon. There are four main reports:
1. Legacy 2. Supplemental
3. Disaggregated 4. Traders in Financial Futures
We shall be looking at the disaggregated reports which are broken down by; agriculture, petroleum
and products, natural gas and products, electricity and metals and other physical contracts. Naturally,
we are more interested here in the metals and especially gold and silver.
All COT reports provide a breakdown of each Tuesday’s open interest for markets in which
20 or more traders hold positions equal to or above the reporting levels established
by the CFTC. The reports are published in futures only formats as well as futures -and-options
combined formats. The data are available in both short format and long format. We shall
be looking at Futures only and short format for this training presentation.
This Report i.e. The Disaggregated COT was first published on 4th September 2009 and
increases transparency by separating traders into the following 4 categories:
1. Producer/Merchant/Processor/User 2. Swap Dealers
3. Managed Money 4. Other Reportables
So let’s discuss briefly what each of these refer to, there are specific definitions for
each of these but we shall summarise them in order not to complicate matters:
1. Producer/Merchant/Processor/User: Predominantly an entity that engages in the
production, processing, packing or handling of a physical commodity and uses the futures
markets to manage hedge risks associated with those activities. So a precious metal or silver
Miner would fall into this category. What’s important to note here, is that generally
these people or organsiations use these markets primarily as a hedge. 2. Swap Dealer:
An entity which primarily deals in swaps for a commodity and uses the futures market to
manage or hedge risk associated with those swap transactions. The swap dealers counterparty’s
could involve hedgefunds or speculative traders or even commercial clients who are managing
risk associated with their dealings with the physical commodity.
3. Money Manager: For the purpose of this report, this is a
registered commodity trading advisor (CTA), a registered pool operator (CPO) or an unregistered
fund identified by the CFTC. These traders are engaged in managing and conducting organised
futures trading on behalf of clients. Please note – on behalf of clients. 4. Other Reportables:
All other reportable traders who do not fall into any of these 3 categories is placed in
this category of ‘other reportables’ and generally these tend to be the individual
trader or small trading entities. On the short form report – which we shall
show later, the categories are divided into 3 subsets essentially: Namely:
Commercials – which as far as gold and silver is concerned are the banks and mining companies
who understand the true supply and demand of the asset and are trying to hedge against
future price movements. Non Commercials – are large speculators,
often known as the ‘smart money’ who speculate on the future movement of the trend in the
underlying asset. They are simply looking to profit from their trade – e.g. Hedge
Funds, Traders and Speculators Non Reportables – Basically private investors
small in nature and which represent around 10% or less of the trade and are often known
as ‘dumb money’ as around 80% of their trades lose.
So before we go on to look at a specific report – we need to define what is meant by futures
and open interest. A futures contract is a derivative which gets
its value from an underlying asset. They are traded to either profit from future values
of the asset or to hedge a position in the asset against a drop in price.
Open Interest differs from volume in that volume is the number of contracts actually
traded per day, while open interest is the number of contracts entered into, either long
or short, that have not been offset by transactions or exercised. They are new or open contracts
which may offer cluesas to what the traders are anticipating price to do in the asset.
i.e. the contract is still open. Now briefly we shall show you a report highlighting
these different categories and on Saturday we shall being up the latest COT report which
will be published tomorrow and run through it with you to highlight some tips and hopefully
identify some trends. So please watch out for our next video which
will be published on Saturday. We hope you have found this video interesting
and informative and if so, please give it a thumbs up and share it on twitter. Please
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updates and offers. Disclaimer:
Illuminati Silver owners come from a background of Banking, International Wealth Management
and Economics. Having now retired from these worlds we are not qualified to give investment
advice. Therefore, this and other productions must not be deemed to be giving such advice
and merely represent the personal views of its owners.