You didn't include the footage, so I can't see the boundaries of the alpha channels in your footage layers, but I can tell that you've got blending modes operating on the alpha channels of your layers---including the one that you've applied Auto-trace to. Auto-trace is going to constrain itself to parts of the layer with non-zero alpha.
But this is moot, really. Auto-trace is certainly not the right tool for the job if what you're attempting to do is create a garbage matte or do rotoscoping-like prep work for keying.
If you want to trace a rough matte around an object in preparation for keying work, try the
Roto Brush tool.
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Todd Kopriva, Adobe Systems Incorporated
Technical Support for professional video software
After Effects Help & Support
Premiere Pro Help & Support
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