The COT report, in plain English

Every Friday afternoon, the U.S. Commodity Futures Trading Commission (CFTC) publishes the Commitments of Traders report. It is a headcount of bets: for each futures market — the S&P 500, gold, crude oil, the euro, corn, bitcoin and dozens more — it says how many contracts each type of large trader was holding as of the previous Tuesday.

That is the whole idea. Price tells you what a market did. The COT report tells you who was on each side while it did it.

It only covers traders large enough to be reportable, and it is always three days stale by the time you read it. That lag is the price of getting a genuine look inside the market rather than guessing at sentiment.

The report splits traders by what they are trying to do. The groups you see here are the ones that matter for reading a market:

On the rates cards you will see leveraged funds holding enormous net short positions in Treasury futures — well over a million contracts in the 2-year and 5-year notes. Read at face value that looks like hedge funds betting hard that yields go up. It is mostly not that.

The bulk of it is the cash-futures basis trade. A fund buys the cash Treasury bond and simultaneously sells the matching future, capturing the small price difference between the two, repeated with heavy borrowed leverage. The short future is the hedge leg of an arbitrage — there is a long cash bond of roughly the same size sitting on the other side of it, and that side never appears in the COT report.

So a record short in Treasury futures tells you the basis trade is crowded, not that anyone expects a selloff. The tell is behavior: the short grows steadily week after week alongside rising open interest, and it does not reverse when rates make a big move. A genuine directional bet would.

That does not make the number useless — it just means something different. A crowded basis trade is a leverage and liquidity risk. When funding costs jump or margins are raised, the trade unwinds fast and both legs get dumped at once, which is roughly what happened in the Treasury market in March 2020. Read the position as a measure of how much leverage is stacked in the plumbing.

For a directional read on the rates cards, look at asset managers instead — real-money institutions taking duration risk on purpose — and pay more attention to week-over-week change than to the level of the leveraged-fund line.

Net position is just long contracts minus short contracts for one group. If leveraged funds hold 300,000 longs and 380,000 shorts, their net is -80,000 — they are leaning bearish.

The raw number is hard to judge on its own. Is -80,000 a lot? It depends entirely on the market and on what that group normally does. Two things are more useful: which direction the net is moving, and how the current level compares with its own history. The COT index below handles the second one for you.

The COT index takes a group's net position and rescales it against its own highest and lowest reading over a chosen lookback window — six months, one year, or three years.

Worked example: over the past year a group's net ranged from -50,000 at its most bearish to +100,000 at its most bullish. Today it sits at +25,000. That is halfway up the range, so the COT index reads 50.

Above 80 means this group is close to the most bullish it has been in that window. Below 20 means close to the most bearish. Those are the readings worth paying attention to, because crowded positions eventually have to be unwound — and the unwind is what moves price.

One warning: extremes can persist. A reading of 95 does not mean the top is tomorrow. It means the fuel for further buying from that group is running low.

Where the COT index comes from: raw contract counts cannot be compared across markets or across decades, so traders normalized them. The 0-100 normalization goes back to Larry Williams' COT work in the 1980s and was developed and popularized by Stephen Briese, author of The Commitments of Traders Bible — the reference text on reading this data.

The gap is the difference between two groups' net positions — for example leveraged funds minus asset managers, or large speculators minus commercials.

A wide gap means the two sides fundamentally disagree about where price is going. Since one of them is eventually wrong, wide gaps mark points of tension in a market.

The disagreement index rescales that difference to 0-100 against its own history, exactly the way the COT index does. Near 100 or near 0 means the disagreement is as sharp as it has been in the lookback window; the middle means the groups are roughly in line.

This is where the report earns its keep. You compare the direction of price with the direction of the informed group's positioning over the same stretch of weeks.

Treat the COT report as context, not as a trigger. It answers 'is this trend well supported or running on fumes?' — it does not answer 'should I buy on Monday?'

A sensible workflow: start on the overview to see which markets are flagging divergences. Open a market, check whether the COT index is at an extreme, look at whether the gap between the two main groups is unusually wide, then look at the chart to see whether price is confirming or contradicting the positioning.

Then use the signal log to see how that market has behaved after similar setups in the past. Some markets — gold, crude, the currencies — respect positioning extremes closely. Others barely react. The log is how you tell them apart.

Finally, wait for price to agree. The strongest setups are a positioning extreme plus a divergence plus an actual turn in price. Positioning alone has kept plenty of traders short a market that kept going up.

The data is three days old when it is published, and the CFTC occasionally revises it. Contract specifications and sizes change over time, which can create jumps in long histories.

The report only covers futures traders. Plenty of money moves the same markets through cash, ETFs and options without appearing here — so it is a partial, not complete, picture of sentiment.

Group labels are broad. Not every 'commercial' is a hedger, and not every hedge fund shows up as managed money. And some positions are not directional at all — leveraged-fund shorts in Treasury futures are largely the hedge leg of the cash-futures basis trade, as described above.

Nothing on this site is investment advice. It is a way of reading a public data set.