Define Open Interest


Old and Other For selected commodities where there is a well-defined marketing season or crop year, the COT data are broken down by “old” and “other” crop years. The “Major Markets for Which the COT Data Is Shown by Crop Year” table lists those commodities and the first and last futures of the marketing season or crop year. An example is CBOT wheat, where the first month of the crop year is July and the last month of the prior crop year is May. On May 3, 2004, positions in the May 2004 futures month were aggregated with positions in the July 2004 through May 2005 futures months and shown as “old” crop futures. Positions in all subsequent wheat futures months were shown as “other.” Supporting documentation for any claims, comparison, statistics, or other technical data will be supplied upon request.

futures positions

Options ContractsAn option contract provides the option holder the right to buy or sell the underlying asset on a specific date at a prespecified price. In contrast, the seller or writer of the option has no choice but obligated to deliver or buy the underlying asset if the option is exercised. Forget about Charts, OI will give perfect price action any situation, your chart tells lie, but not OI data. Don’t spend any money for learning charts and don’t make trade teachers to become rich. Need minimum 1 year to understand the OI chain completely to trade on, later you will become a master.

Open Interest and Options

For example, a trader holding a long put position of 500 contracts with a delta factor of 0.50 is considered to be holding a short futures-equivalent position of 250 contracts. A trader’s long and short futures-equivalent positions are added to the trader’s long and short futures positions to give “combined-long” and “combined-short” positions. Open interest is typically shown along with the current price and volume when viewing an option or futures quote. The volume shows the total number of contracts traded for the period. Volume is also a strong indicator to show how actively a market is traded.

These figures are not netted, but instead show overall volume . Note that the definition of open interest is not the same as volume. Option volume tells you the total number of contracts bought and sold, but if some of those purchases or sales were closing transactions, then the volume will not be the same as the open interest.

However, as you gain, you will become familiar with the different strategies to make money. In contradiction to all this, the lower values of open interest for F&O contracts of a stock indicate that investors are not interested in taking new positions in that stock at the given point in time. When the open interest for security is increasing, it indicates that the additional money is being invested in the market. And when open interest is decreasing, it means that money is being flown away from the market. A higher number of open interest indicates that more buyers and/or sellers are interested in buying or selling a particular security. If there is a high open interest for call options of a particular stock, it means that most investors are predicting that the price of that stock may go up.

Identifying trading opportunities using both the volume and open interest metrics allow traders to more smoothly enter and exit markets at the best possible price. Because of this, when you open a new position the number of contracts in existence could increase which means the open interest of them will go up. If you subsequently close that position by using the sell to close order, they could be sold back to the writer and therefore cease to exist.

How To Calculate Trading Volume

They tell us which contracts are the most liquid for trading purposes. As a general rule, trading activity should be limited to those delivery months with the highest open interest. As the term implies, higher open interest means that there is more interest in certain delivery months. DerivativeDerivatives in finance are financial instruments that derive their value from the value of the underlying asset. The underlying asset can be bonds, stocks, currency, commodities, etc.

High open interest for a given option contract means a lot of people are interested in that option. However, high open interest doesn’t necessarily mean the people trading that contract have the correct forecast on the stock. After all, for every option buyer expecting one result, there’s an option seller expecting something else to happen. So open interest doesn’t necessarily indicate a bullish or bearish forecast. An option chain, or options matrix, is a table of all the available options on a particular security. An option chain shows all the listed calls and puts within a specific maturity date, sorted according to factors like their strike price, expiration date, and volume and pricing information.

This results in a valid transaction and the closing of one contract. However, as options traders you have to consider both volume AND open interest as they are completely different data points. A large accumulation of put open interest can define a point of extreme market pessimism, which usually coincides with the depletion of selling strength.

stock index futures

This information is shared with advertisers on an aggregate basis. For MIS+ product, while placing order user places first leg order along with compulsory Stop loss trigger order (i.e second leg) & book profit trigger order . First leg order gets tagged with second/third leg order and profit and loss will be calculated based on such tagging and will be computed based on the pair of trades that get executed through the product.

When open interest goes up, this represents new money coming into the market and is usually a bullish sign. This usually means that the current market trend for that option will continue. When open interest decreases, this represents money flowing out of the market and means the current trend in price is ending. High open interest usually indicates higher liquidity for a contract. This generally means there will be less of a difference between what someone wants to sell an option for and what someone else wants to buy it for.

I understand open interest – How does it fit with volume?

This led to the common misunderstanding that open interest is the sole determinant of liquidity in options trading. We shall explore in this tutorial the correct method of determining liquidity in options trading. Volume is the total number of transactions filled on eachstock options contract for the day.

  • If Trader C sells-to-open 5 contracts of XYZ, open interest is 13.
  • Trader C later also decides to buy five contracts at the same time that Trader D decides to sell five contracts.
  • Any investment decision you make in your self-directed account is solely your responsibility.
  • Just like increasing price action with increasing oi shows a bullish trend; price action can tell more .

There are many market tools and indicators that you can use to analyse market situations and predict short-term market movements. Continue reading to know the open interest meaning and how it can help you in your F&O trading. A leveling off of OI is letting you the market can no longer sustain the trend. When open interest increases you know new money is flowing into the market. A result of increased open interest means the present trend continues. I/we have no stock, option or similar derivative position in any of the companies mentioned, and no plans to initiate any such positions within the next 72 hours.

Suppose A buys six contracts, B buys four contracts, and C sells 10 contracts. Now, there are 10 active Nifty50 F&O contracts on the long side (A+B) and 10 active contracts on the short side ; hence the open interest would be 10, i.e., the maximum number of active contracts at a given point. Let’s understand the calculation of the open interest with the help of an example.

These traders are drawn from the noncommercial and commercial categories. Volume and open interest are two key technical metrics that describe the liquidity and activity of options and futures contracts. “Volume” refers to the number of contracts traded in a given period, and “open interest” denotes the number of contracts that are active, or not settled. Here, we examine these two metrics and offer tips for how you can use them to understand trading activity in the derivatives markets.

Options Pricing

Therefore, when the volume is higher than open interests, it indicates a very high level of trading that day. Most s/w including Pi offers something called as ‘Candle volume’ chart which combines candlestick and volumes. Before we conclude this module on “Futures Trading”, we must address one of the questions that is often asked- “What is Open Interest ? ”, and “How can we benefit from the Volumes and Open interest data? ” Let me attempt to answer these questions and more in this chapter.

  • Options contracts that have a high open interest tend to also have high liquidity, but as mentioned above, there are other factors to consider too.
  • These figures are not netted, but instead show overall volume .
  • This scenario is consistent with a continuing downtrend and is bearish.
  • Increasing open interest represents new or additional money coming into the market while decreasing open interest indicates money flowing out of the market.

Open interest as a metric is more often used by looking at trends over days or weeks. As with trading volume, open interest does not tell investors why the options are being traded and whether those trading them hold bullish or bearish positions. If the price falls along with increasing open interest and volume, market sentiment is bearish.

Time Value of Money

If there is very little open interest but a lot of volume it may be a good time to check why so many people are selling off their options. Open Interest is the total number of options or futures contracts that are “open”, meaning currently owned by an investor and not yet expired. Generally speaking, a high volume and high open interest both indicate a liquid market with many buyers and sellers for a particular option. Changes in open interest and volume can also be used to confirm market sentiment. For example, a rising price with increasing volume and open interest indicates that the market for an option is strong, while a rising price with decreasing volume and open interest suggests a weak market. More volume also means that there is greater liquidity in the contract; this is desirable from a short-term trading perspective, as it means that there is an abundance of buyers and sellers in the market.


Open interest decreases when buyers and sellers of contracts close out more positions than were opened that day. Open interest is the number of options or futures contracts that are held by traders and investors in active positions. These positions have been opened, but have not been closed out, expired, orexercised.

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The Whistleblower Program provides monetary incentives to individuals who come forward to report possible violations of the Commodity Exchange Act. Changes in Commitments from Previous ReportsChanges represent the differences between the data for the current report date and the data published in the previous report. Past performance of a security or strategy is no guarantee of future results or investing success. The volume value is reset to zero at the start of every other day.

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