Open Interest

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DEFINITION of 'Open Interest'

1. The total number of options and/or futures contracts that are not closed or delivered on a particular day.

2. The number of buy market orders before the stock market opens.

BREAKING DOWN 'Open Interest'

1. A common misconception is that open interest is the same thing as volume of options and futures trades. This is not correct, as demonstrated in the following example:

Open Interest



-On January 1, A buys an option, which leaves an open interest and also creates trading volume of 1.
-On January 2, C and D create trading volume of 5 and there are also five more options left open.
-On January 3, A takes an offsetting position, open interest is reduced by 1 and trading volume is 1.
-On January 4, E simply replaces C and open interest does not change, trading volume increases by 5.

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RELATED FAQS
  1. What does a falling open interest on a stock signal?

    Falling open interest on a stock signals that option traders have less conviction in the stock's direction. Open interest ... Read Full Answer >>
  2. How can I profit from monitoring open interest?

    Since markets experience asymmetric information between parties, monitor whether there is an imbalance between the open interest ... Read Full Answer >>
  3. What are the benefits of using open interest as an indicator?

    Open interest is a good technical indicator of trends and trend reversals for derivative securities markets. The open interest ... Read Full Answer >>
  4. What is the difference between open interest and volume?

    In the options market, two measurements describe the liquidity and activity of option contracts. Volume is the amount of ... Read Full Answer >>
  5. What does a rising open interest on a stock signal?

    An increasing open interest indicates there are new option contracts on a stock being bought to open, and there is money ... Read Full Answer >>
  6. What does high open interest tell you about an option?

    A high open interest of options provides investors and traders with useful information to consider when entering options ... Read Full Answer >>
  7. How do I measure option liquidity?

    An option is a financial instrument that gives the holder the right to purchase shares in a company at a certain set price ... Read Full Answer >>
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