What do open interest and the COT report say about positioning?

Futures markets publish something equity markets largely do not: a running count of how many contracts are genuinely open, and a weekly breakdown of who holds them. Used carefully, this is the best positioning data available in public markets. Used carelessly, it is a fast route to being confidently wrong.

Volume versus open interest

• Volume — contracts traded during the session. Resets each day.
• Open interest — contracts still open at the end of the session. A running total.

Every contract has a long and a short, so open interest counts pairs. What happens to it depends on whether each side is opening or closing:

• New buyer meets new seller → open interest rises by 1 (fresh risk enters the market)
• Closing buyer meets closing seller → open interest falls by 1 (risk leaves the market)
• New buyer meets closing seller, or the reverse → open interest unchanged (the position changed hands)

So heavy volume with flat open interest means positions rotating between participants. Heavy volume with rising open interest means the market's total risk is genuinely growing.

The conventional readings, and their limits

The classic four:

• Price up, open interest up → new longs committing
• Price up, open interest down → shorts covering, positions closing
• Price down, open interest up → new shorts committing
• Price down, open interest down → longs liquidating

These are descriptions of what happened, and they get over-read as predictions constantly. Open interest tells you about participation and commitment. It does not tell you about the next move. Treat it as one more structural fact alongside price and volume.

The Commitments of Traders report

The CFTC publishes a weekly COT report for US futures markets: positions as of Tuesday's close, released Friday afternoon. Reportable holders are bucketed:

• Producer / merchant / processor / user — the commercial hedgers from this unit's first lesson. The physical market.
• Swap dealers — intermediaries laying off exposure taken on in OTC deals.
• Managed money — CTAs, hedge funds, systematic trend followers. The closest thing to a clean read on speculative positioning.
• Other reportables and non-reportables — everyone else, the latter being positions too small to report individually.

One structural fact is worth internalising before you ever read a COT chart: in most commodity markets, commercials are persistently net short while managed money is usually net long. That is not smart money signalling a bearish view. It is producers hedging output, exactly as the market was designed to let them. Reading commercial shorts as a bearish forecast is the single most common misuse of the report.

Where it is genuinely useful

Extremes. When managed-money net length reaches a multi-year high, the marginal buyer has already bought. That says something real about fragility — a crowded position that unwinds hard on bad news — and nothing whatsoever about timing. Positioning extremes have persisted for many months before resolving, and they have resolved in both directions.

Context. A price move on rising open interest with rising managed-money length reads differently from an identical move on falling open interest. The move is the same; what it says about commitment is not.

The lag. By Friday afternoon, Tuesday's snapshot is three days old. In a fast-moving market it is a historical document, not a live feed.

Positioning data describes a market. It does not instruct anyone, and nothing here is a suggestion to take or avoid any position.

In the data

Listed options publish the same two counts per contract. Apple's chain is below, in the EODHD Terminal, with volume (Vol) and open interest (OI) beside every strike.

Open AAPL.US — options in the EODHD Terminal

Open interest is a standing stock, updated once a day; volume is that day's flow. That is why a contract can trade more in one session than there is open interest in it: the day's buying and selling can be opened and closed again before the count is taken. Nothing on the chain splits open interest into longs and shorts, or into hedgers and speculators: every contract has one of each, and who they are is a separate report, not a column.

Try it now

1. Open the CFTC's Commitments of Traders page (cftc.gov, Market Reports) and take the disaggregated futures-only history for crude oil, NYMEX WTI. The weekly reports are public, and past years come as one file per year.
2. Five years of the same commodity's price is below. Line your managed-money net length up against it by date, and find one moment when positioning sat at an extreme.

3. Measure forward from that date until the price moved meaningfully in either direction, and write down the number of bars. That gap between "crowded" and "resolved" — and the fact that its direction is not reliable — is the entire discipline.