Definition of Open interest:
To understand open interest, we must first explore how options and futures contracts are created. If an options contract exists, it must have had a buyer. For every buyer, there must be a seller since you cannot buy something that is not available for sale.
In futures and options trading, total number of outstanding contracts on any given day that have (1) not been liquidated by an offsetting contract or by the delivery of the underlying commodity or financial instrument, or (2) (in case of options) are allowed to expire. Open interest is a measure of liquidity in the respective markets.
Open interest is the total number of outstanding derivative contracts, such as options or futures that have not been settled for an asset. The total open interest does not count, and total every buy and sell contract. Instead, open interest provides a more accurate picture of the options trading activity, and whether money flows into the futures and options market are increasing or decreasing.
The number of contracts or commitments outstanding in futures and options that are trading on an official exchange at any one time.
How to use Open interest in a sentence?
- Open interest is the total number of outstanding derivative contracts, such as options or futures that have not been settled.
- Today, the CBOE reported total option open interest of 58.7 million contracts, an increase of 9.7 million from year-end.
- Increasing open interest represents new or additional money coming into the market while decreasing open interest indicates money flowing out of the market. .
- Open interest is commonly associated with the futures and options markets.
- Open interest equals the total number of bought or sold contracts, not the total of both added together.
Meaning of Open interest & Open interest Definition