Open interest

The idea

Open interest counts contracts still outstanding at a particular point, often the end of a trading day. It describes positions that have not yet been closed or fulfilled. Each matched contract has opposing parties, but the contract itself is counted once rather than treating buyer and seller as separate contracts.

How it works

When both sides open a new position, outstanding contracts increase. When both close existing positions, outstanding contracts decrease. A trade that transfers an existing position to a new holder can leave the outstanding total unchanged. The exact treatment follows the exchange’s reporting rules, making the point in time and product definition important.

A hypothetical example

Imagine a hypothetical market in which traders first create a new matched contract. It adds to open interest. Later, a holder can trade out of that position while another trader takes it over. Trading has occurred, so it contributes to volume, but the contract can remain outstanding. When both sides ultimately close the matched position, it no longer contributes to open interest.

A useful distinction

Open interest is a stock measured at a point in time; trading volume is activity measured over a period. A market can trade many contracts during a month while ending with a much smaller outstanding total. Neither number alone identifies the value of the contracts or establishes whether market prices will rise. Product specifications and other information remain necessary.

The idea

How it works

A hypothetical example

A useful distinction

Sources

In the news