2007-03-19 00:51:06 · 2 answers · asked by BHAVNA G 1 in Business & Finance ➔ Investing
The first paragraph in the first response is correct. The second two paragraphs in the first response are wrong.
Open interest is the number of contracts that exist. It has nothing to do with the bid or ask size.
Open interest increases when a trade is between "buy to open" and "sell to open" orders. Since both sides are opening new positions, new contracts are created.
Open interest decreases when a trade is between "buy to close" and "sell to close" orders. Since both sides are closing their prositions, the contracts not longer exist. Open interst also decreases when an option is exercised or when it expires.
2007-03-19 15:50:15 · answer #1 · answered by zman492 7 · 0⤊ 1⤋
Its the gross number of a given futures or option contracts outstanding and not expired or closed with offsetting position.
Lets say there are 5000 contracts long/buy of crude futures, and 6000 contracts short/sell.
The market is net short 1000 contracts, but the open interest is 11000 contracts.
2007-03-19 00:57:36 · answer #2 · answered by Anonymous · 1⤊ 1⤋