COMMITMENT OF TRADERS REPORT
Plain English
Every Friday, the CFTC publishes the Commitment of Traders (COT) report, showing how different groups are positioned in futures markets. It tells you what the 'smart money' (commercials), 'big speculators' (hedge funds), and 'small traders' are doing.
Going deeper
The COT report, published weekly by the CFTC, breaks down open interest into three categories: Commercials (hedgers — producers, consumers, and merchants who use futures for their business), Non-Commercials (large speculators — hedge funds, CTAs, and managed money), and Non-Reportable (small speculators — retail traders). Commercials are considered the 'smart money' because they have the best fundamental knowledge of their markets. When commercials are extremely net long (or short), it often signals a potential turning point. The COT report is a contrarian sentiment indicator: extreme speculator positioning often precedes reversals.
Examples
Extreme Positioning
Hedge funds (Non-Commercials) are net short 200,000 gold contracts — a record. Meanwhile, gold producers (Commercials) are the least hedged in years. This extreme divergence suggests smart money (commercials) expects higher gold prices.
Sentiment Reversal
Speculators are record net long crude oil. Everyone is bullish. The COT data suggests a crowded trade. When a negative headline hits, there's no one left to buy — everyone already has. Oil drops 15% in a week as longs rush to exit.