Open interest in cotton futures and options contracts more than doubled between January 2006 and February 2008. However, the share of total long positions in the ICE cotton futures and options markets held by hedgers declined from an average of 31% in 2006, to 27% in 2007, to 26% in 2008.
The counterpart of the decline in the share of total long positions held by hedgers was the increase in the share of total long positions held by speculators (individual and index traders) from 69% in 2006 to 73% in 2007, to 74% in 2008.
Individual traders, not index traders, accounted for an increasing share of long positions held by speculators, from 50% in 2006 to 61% in 2007, to 65% in 2008; the share of index traders (pension funds, managed funds, and other traders with predominantly long futures positions replicating commodity indices) declined from 50% in 2006 to 39% in 2007, to 35% in 2008.
Therefore, index traders have not been the driving force behind the increase in open interest for cotton futures and options, but individual speculators have.
Net positions (the difference between long and short positions) held by index traders remained positive and more than doubled between January 2006 and February 2008, indicating bullish sentiments among these speculators.
On the other hand, the net positions held by individual traders showed great variability around zero until June 2007, when they turned positive and increased thereafter.
Therefore, individual speculators have been instrumental in increasing total (individual and index traders') net speculative positions since June 2007, placing upward pressure on nearby cotton futures prices.
The counterpart of the decline in the share of total long positions held by hedgers was the increase in the share of total long positions held by speculators (individual and index traders) from 69% in 2006 to 73% in 2007, to 74% in 2008.
Individual traders, not index traders, accounted for an increasing share of long positions held by speculators, from 50% in 2006 to 61% in 2007, to 65% in 2008; the share of index traders (pension funds, managed funds, and other traders with predominantly long futures positions replicating commodity indices) declined from 50% in 2006 to 39% in 2007, to 35% in 2008.
Therefore, index traders have not been the driving force behind the increase in open interest for cotton futures and options, but individual speculators have.
Net positions (the difference between long and short positions) held by index traders remained positive and more than doubled between January 2006 and February 2008, indicating bullish sentiments among these speculators.
On the other hand, the net positions held by individual traders showed great variability around zero until June 2007, when they turned positive and increased thereafter.
Therefore, individual speculators have been instrumental in increasing total (individual and index traders') net speculative positions since June 2007, placing upward pressure on nearby cotton futures prices.
