Open Interest (OI)

Open interest (OI) is a derivative indicator that refers to the total number of outstanding derivative contracts, such as options or futures, that are unsettled at a given point in the market. For instance, if a trader goes long and buys two contracts, the open interest will be two. Similarly, if another trader goes short and sells one contract, now the total open interest will be three. Until their counterpart exits the position, it will be considered as ‘open’. Open interest is also a good indicator of the prevailing liquidity in the market. Before entering a position, traders use OI data to gauge the underlying market sentiment.

Open interest measures the interest of traders in an Option. It tells a trader about the total number of a particular options contracts are currently traded but not yet exercised, assigned or squared off. For example, say 5 traders are holding 20 lots of contract. So the open interest for that day would be 100.

Answered on 2022-07-01