The OI itself is released each weekday at approximately 9:15 EST. When evaluating the OI we begin with the COT report. I dismiss the Supplemental because it is confusing to me. Knowing the delta position of each sector is important but the delta position is affected by futures price and option value changes as well as new option positions added. The Disaggregated together with the Legacy reports reveal to us the trends of each sector in the market. It is necessary to look at changes in the sector together with price changes. We then look at the open interest and try to analyze it by making educated assumptions.
Presently, we have a situation in which spreads are a low percentage of both the total volume as well as the front month volume. This makes it easier to see who is moving the market. During roll time, the high volume of spreads obscures the outright activity. Managed Money funds and Commercials are the most predictable and have been the more important factors in the market.
For over two years we have seen the funds selling the market lower, often reversing but never reversing their net position from short to long, until now. For the last several months we have seen funds buying their shorts back and now going long. They have become supporters of the market. Of course there is no guarantee that they will succeed in sustaining a trend reversal as the more unpredictable large traders, swap dealers and small traders can enter the market at any time either as supporters or otherwise. Commercials, although predictable, require more analysis.
As prices fall commercials are natural buyers. Option holders hedge as do roasters and merchants. We recognize that the consumer sector is buying as they usually buy forwards making spreads pressured as specs sell the front month. In an up market, as we have today, the COT is telling us that commercials are selling both as option hedgers and as producers. Of course the opposite affect takes place on spreads as managed money buys the front and origin sells the forwards. Origin is not as consistently present as the consumer sector. What motivates all these sectors into action is an interesting topic as well but for another day and likely explained by many forum participants as well. Good Trades.