The Commitments of Traders (COT Report) has several key terms you need to understand before you can read the report. The key terms are, Open Interest, Reportable Positions, Commercial and Non-commercial Traders, Non-reportable Positions, Spreading, Changes in Commitments from Previous Reports, Percent of Open Interest, Number of Traders, Old and Other Futures, Concentration Ratios, and Supplemental Report.
Supplemental Report – Based upon the information contained in the report of futures-and-options combined in the short format, the Supplemental report shows an additional category of “Index Traders” in selected agricultural markets. These traders are drawn from the Noncommercial and Commercial categories.
Coming from the Noncommercial category are positions of managed funds, pension funds, and other investors that are generally seeking exposure to a broad index of commodity prices as an asset class in an unleveraged and passively-managed manner.
Coming from the Commercial category are positions for entities whose trading predominantly reflects hedging of over-the-counter transactions involving commodity indices.
For example, a swap dealer holding long futures positions to hedge a short commodity index exposure opposite institutional traders, such as pension funds.
All of these traders—whether coming from the Noncommercial or Commercial categories—are generally replicating a commodity index by establishing long futures positions in the component markets and then rolling those positions forward from future to future using a fixed methodology.
Yet, some traders assigned to the Index Traders category are engaged in other futures activity that could not be disaggregated.
So, as a result, the Index Traders category, which is typically made up of traders with long-only futures positions replicating and index, will include some long and short positions where traders have multi-dimensional trading activities, the preponderance of which is index trading.
Likewise, the Index Traders category will not include some traders who are engaged in index trading, but for whom it does not represent a substantial part of their overall trading activity.