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

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.

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