open interest

Open interest means the total number outstanding of derivative contracts that have not been settled (offset by delivery).
open interest
For each buyer of a futures contract there must be a seller. From the time the buyer or seller opens the contract until the counter-party closes it, that contract is considered ‘open’.
Open interest applies primarily to the futures market, it helps the measure the flow of money into the futures Market.
In option trading, open interest indicates the intensity of trading in a financial instrument. From analysts view increasing open interest as an indication that new money is flowing into the marketplace.

Therefore, to determine the total open interest for any given market we need only to know the totals from one side or the other, buyers or sellers, not the sum of both.
The open interest position that is reported each day represents the increase or decrease in the number of contracts for that day, and it is shown as a positive or negative number.

From this assumption, one could conclude that the present trend will continue. Analogously, declining open interest implies that the market is liquidating, and suggests that the prevailing price trend is coming to an end. A common misreading is that open interest is the same thing as the number of option contracts traded.
The relationship between the prevailing price trend and open interest can be summarized by the following
Price       Open Interest          Interpretation
Rising       Rising                       Market is Strong
Rising       Falling                     Market is weakening
Falling      Rising                      Market is Weak
Falling      Falling                     Market is strengthening

The Author

Pramod Baviskar

Professional Market Trader And Owner Of Dalal Street Winners Advisory And Coaching Services. Working Since 2007 And Online Presence Since 2010. We Provide Highly Accurate And Professional 1 Entry And 1 Exit Future, Option, Commodity, Currency And Intraday Stock Tips On Whatsapp With Live Support And Follow Up.
COPYRIGHT © 2009-2018. Pramod Baviskar. Dalal street winners advisory and coaching services. FAQ | Disclaimer | Privacy Policy

This website is best viewed using Microsoft Internet Explorer 9 or higher, and/or latest version of Google Chrome and Mozila Firefox browsers.