what is open interest 
open interest is the total number of outstanding derivative contracts for an asset such as options or futures that have not been settled open interest keeps track of every open position in a particular contract rather than tracking the total volume traded thus open interest can provide a more accurate picture of a contract s liquidity and interest identifying whether money flows into the contract are increasing or decreasing investopedia dennis madambaunderstanding open interestopen interest is most often associated with the futures and options markets where the number of open contracts changes daily open interest is the number of options or futures contracts held by traders in active positions these positions have been opened but have not been closed out expired or exercised open interest decreases when buyers or holders and sellers or writers of contracts close out more positions than were opened that day 1 to close out a position a trader must take an offsetting position or exercise their option open interest increases once again when investors and traders open more new long positions or sellers take on new short positions in an amount greater than the number of contracts that were closed that day here s a simple scenario assume that the open interest of the abc call option is 0 the next day a trader buys 10 abc options contracts as a new position open interest for this particular call option is now 10 the day after five abc contracts were closed and 10 were opened this means that open interest increased by five to 15 a common misconception about open interest lies in its ability to make predictions new traders might be led to believe that it can forecast price action but it cannot high or low open interest only reflects trader interest and sentiments open interest vs trading volumeopen interest is sometimes confused with trading volume but the two terms refer to different measures for example imagine one trader holds 10 option contracts and sells them to a new trader entering the market the transfer of these contracts does not create any change in the open interest because positions were transferred not closed or opened trading volume on the other hand increased by 10 because of the transferral the importance of open interestopen interest is a measure of market activity little or no open interest means there are no opening positions or that nearly all the positions have been closed high open interest means there are many contracts still open which means market participants will be watching that market closely open interest measures money flow into or out of a futures or options market 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 is significant to options traders as it provides key information regarding the liquidity of an option high open interest creates opportunities to buy and sell this liquidity helps traders move into and out of positions quickly if liquidity is low low open interest traders are less able to get in and out of the market real world example of open interestbelow is a table of trading activity in the options market for traders a b c d and e open interest is calculated following the trading activity for each day the key to understanding how this works is whether the trader bought or sold to open or close positions 