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In this WSJ article, it comments

Traders held a net $22.6 billion in bets that the dollar will appreciate, a gain of 31% in net wagers over the previous week and the largest such position since June 2010

and

Speculators trading the yen held a net $10.2 billion in bets that the currency will decline

I'm not sure I understand what this is saying.
If you are shorting the yen, you would borrow yen and buy another currency, say Swiss Franc with the money, right?

Does this article add up all other currency crosses to get the 'net' figure?
So they don't care what it is depreciating against?

For example if Annie is short $7.8 billion worth of yen with a Yen/Euro trade, and Johnny is short $2.6 billion yen with a Yen/Aussie trade, and Carlos is long with a yen/USD $200 million trade - is that the figure they are quoting? The sum of all the yen trades?

  • 4
    I'm commenting, not answering here. The futures market contracts are neutral, i.e. when I go long, someone has to be a seller and therefore, short. I am surmising the directional 'bets' WSJ refers to are options and not futures, hopefully an answer will clarify this point. – JTP - Apologise to Monica May 2 '12 at 13:06
  • @DefenestrationDay I don't have full access to the article since I'm not a subscriber. I can answer your question, but I need to know if the full article gives any further detail on sources. The first section you referred to was described as sourced from "government data". The part about the Euro was the CME. I couldn't see the Yen part (not in the preview), assume it was from the CME too. Don't assume this is a combo of futures AND options. We need to check the sources first. Good question, by the way! I hope you can find the sources, I love doing this kind of fin. data validation. – Ellie Kesselman May 6 '12 at 20:04
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When trading Forex each currency is traded relative to another. So when shorting a currency you must go long another currency vs the currency you are shorting, it seems a little odd and can be a bit confusing, but here is the explanation that Wikipedia provides:

An example of this is as follows: Let us say a trader wants to trade with the US dollar and the Indian rupee currencies. Assume that the current market rate is USD 1 to Rs.50 and the trader borrows Rs.100. With this, he buys USD 2. If the next day, the conversion rate becomes USD 1 to Rs.51, then the trader sells his USD 2 and gets Rs.102. He returns Rs.100 and keeps the Rs.2 profit (minus fees).

So in this example the trader is shorting the rupee vs the dollar.


Does this article add up all other currency crosses to get the 'net' figure? So they don't care what it is depreciating against?

This data is called the Commitment of Traders (COT) which is issued by the Commodity Futures Trading Commission (CFTC)

In the WSJ article it is actually referring to Forex Futures.


In an another article from CountingPips it explains a bit clearer as to how a news organization comes up with these type of numbers.

according to the CFTC COT data and calculations by Reuters which calculates the dollar positions against the euro, British pound, Japanese yen, Australian dollar, Canadian dollar and the Swiss franc.

So this article is not talking about futures but it does tell us they got data from the COT and in addition Reuters added additional calculations from adding up "X" currency positions.


No subscription needed: Speculators Pile Up Largest Net Dollar Long Position Since June 2010 - CFTC

Here is some additional reading on the topic if you're interested:

CFTC Commitment of the Traders Data – COT Report

FOREX : What Is It And How Does It Work?

Futures vs. Forex Options

Forex - Wiki

  • In the Wiki example, the trader is long the Dollar, short the Rupee. "When shorting a currency you are actually buying that currency" - not sure what this means, but it's the opposite of the example you cite. If you buy a stock, you are long, same with currency pairs. You are long the currency you want to gain value and short the other. – JTP - Apologise to Monica Jun 22 '12 at 3:41
  • The example is long dollar, short rupee, trader has profited by rupee dropping in value compared to the dollar. – JTP - Apologise to Monica Jun 22 '12 at 4:17
  • @JoeTaxpayer Yes thank you, you are correct. I was looking at the price the wrong way lol. I corrected my answer. – Kirill Fuchs Jun 22 '12 at 4:21
  • The Wiki has a sentence that's ambiguous at least to me. But I learned my lesson editing Wikipedia finance articles. I'll pass on this one. Good edit above +1 – JTP - Apologise to Monica Jun 22 '12 at 4:26

protected by Community May 20 '17 at 12:13

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