What is Open Interest in Futures and Options

Open Interest


Open interest tells you the total number of outstanding contracts held by market members by the end of the day. It can also be defined as the total number of futures contracts or option contracts that have not yet been squared off by delivery. Open interest is usually associated with the Futures and Options markets. Open interest measures the money flow in the futures market. For every seller of a futures contract, there will be a buyer of that contract. 

Long Build up :

Long buildup means more people are showing interest in buying particular stocks. We can understand it with the combination of Price and Open Interest. If the stock price is moving up and open interest is moving upward, we can assume a long buildup occurs in the market. 

Short Build up:

Short buildup means more people are expecting the stock prices will move down and create Short positions. So if the stock price is moving down and open interest is moving up, we can assume a short buildup is happening in the market.

Long Unwinding

It is done by traders when a stock price is moving up and reaches the trader's target. Then, they close their holding and book profit.

Short Covering

It is done by traders when the stock price is moving up. Traders initially bet that stock will move down when that does not occur. Then, they come and close their position.
Location: India

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