Open Interest

Overview

The Open Interest refers to the total number of outstanding derivative contracts, like futures that have not been settled. It provides a picture of the amount of trading activity and liquidity in the market.

Open Interest is calculated by counting the number of contracts that are open and not yet liquidated by an offsetting trade or an exercise or assignment. The calculation is straightforward:

Open Interest = Total number of outstanding contracts

Runbot Open Interest overview

Interpretation

Open Interest is often used in conjunction with price data to interpret market trends. Here are some common interpretations:

• Increasing open interest means that new money is flowing into the marketplace. This scenario typically indicates a trend continuation.

• Decreasing open interest shows that money is leaving the market and that the recent trend is coming to an end.

Indicator Triggers:

The Open Interest indicator support some basic general triggers.

Triggers list

Open Interest triggers list

Notes

• Open Interest (OI) can be considered as a measure of market exposure. In trading, particularly with derivatives like futures and options, OI represents the total number of active contracts that are held by market participants at any given time.

• It reflects how much money is currently committed to the market, indicating the level of involvement or exposure that traders have.

• OI is not an indicator that necessarily prompts you to enter or exit a trade ; Instead, it offers background context that helps to shape your expectations.

• OI does fluctuate automatically with price when measured in dollar terms, particularly for dollar-margin contracts. I find it more effective to denominate it in coins (Similar to how Total Value Locked (TVL) is measured).