Calculation and mechanics
The basis is the net position of a trader group from the CoT Report, i.e. long minus short. The CoT index can in principle be calculated for different groups, the positioning of the commercials is commonly used.
For the chosen period the lowest and highest net position are determined. The current net position is then placed between them on a scale from 0 to 100. The calculation thus follows the principle of the IV Rank, only with positions instead of volatility.
Typical periods are 26 weeks and 156 weeks. A shorter window reacts faster to changes and reaches the extremes 0 or 100 more often. A longer window places the current positioning in a wider historical context. Because minimum and maximum define the scale, the index can also change considerably when an old extreme drops out of the lookback window.
Values from about 75 are often regarded as the upper, values up to about 25 as the lower zone. They merely show that the current net position is near its high or low for the chosen period. A CoT index of 90 therefore does not automatically mean that a group is net long. Commercials can still be net short, only less so than usual in the period under review.
CoT index = (current net position - minimum) / (maximum - minimum) x 100
Distinction
The net position itself is stated in contracts and is hard to compare directly across different futures markets. The CoT index normalises the positioning to a scale from 0 to 100 and so makes the historical assessment within one market easier.
In the process, however, information about the absolute size of the position and how the different trader groups relate to each other is lost.
The Open Interest Range applies the same min-max logic to the total open interest. It therefore shows whether comparatively many or few contracts are currently open, not how they are distributed among the trader groups.
Related terms
- CoT Report (Commitments of Traders, CFTC report)
- Commercials and Non-Commercials (Trader groups in the CoT report, large speculators, small traders)
- Open Interest Range (Open interest over three years)
- IV Rank (IVR)
All market and analytical information is provided for educational and analytical purposes only and does not constitute investment advice or a trading recommendation.