Open Interest

Intermediate

Open interest is the total number of outstanding futures or options contracts that have not yet been closed, exercised or expired.

Every futures or options contract has a buyer and a seller. Open interest counts the number of contracts currently held open. It rises when new positions are created and falls when existing positions are closed.

For example, if a new buyer and a new seller create a contract, open interest rises by one. If a trader who bought a contract sells it to another trader who is closing a short position, open interest falls by one. If a buyer simply passes the contract to another new buyer, open interest stays the same.

Open interest differs from trading volume, which counts the number of contracts traded during a period. A contract can be traded many times without changing open interest.

Traders use open interest as an indicator of market activity and interest. Rising open interest with rising prices may suggest new money supporting an upward trend, while falling open interest may suggest positions are being closed. Open interest is also used to gauge liquidity in specific contracts.

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