what is the meaning of change in open interest in equity market (options and future market)?

Question

meaning of change in open interest - this may positive change in open interest or negative change in open interest

Answer 1

The above posters are a little off in their answers. Open interest (I/O) is the number of open futures/options contracts, ie, contracts that are still open and working in the market.

Scott O is a little off, it's not the number of long contracts, it the number of contracts because for every long, there is someone who's short. Let's see if I can give you an example:

Let's say that I'm looking at sugar and I think sugar is going to go down, so I short (sell) a sugar option or futures. You think sugar is going up, so you buy my option or futures. So, in this particular example, open interest is 1 because I wrote (shorted) 1 sugar contract and you bought it.

Actually, and increase in O/I is an indicator of increasing short positions, not long. The big players in the markets are commercials and they are generally hedgers meaning they're primarily short. So an increase in O/I would signify that the commercials are increasing their short positions.

So, in the simplest terms, for every futures contract, there is both a buyer and seller simultaneously opening a position, thus O/I is the number of contracts that are remaining open and still working in the market.

I hope that makes sense

Answer 2

1

Answer 3

The second, third and fourth answers are mostly correct. Open interest does reflect the number of contracts that exist. Since the number of long contracts is always equal to the number of short contracts, it represents both the number of long contracts and the number of short contracts. Open interest increases when a trade takes place and both the buyer and the seller are opening new positions. Open interest decreases when a trade takes place and both the buyer and the seller are closing existing positions. If one party to the trade is opening a position and the other is closing a position the trade does not change open interest.

Here is an example I posted on a message board some time ago.

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“Open Interest” is the number of option contracts that exist. “Volume” is the number of option contracts traded.

To the best of my knowledge, every time open interest and volume are displayed along with current quotes for an option, the open interest figure represents the number of contracts that existed at the beginning of the trading day, while the volume figure represents the number of contracts traded during the day.

To see how these numbers change and are reported, let’s go through the first trades of a new option, January 25 calls for Wanda’s Hemp and Opium importers, symbol WHO ME.

On the first day the option is available, it will start with

Volume 0
Open interest 0.

At 10:30 that day Andy buys 25 contracts, sold buy Brenda:

Volume 25
Open interest: 25 (but still reported as 0 for the rest of the day).

At 2:00 that day Cathy buys 10 contracts, sold by Don.

Volume 35
Open interest 35 (but still reported as 0 for the rest of the day).

There are no other trades for the option that day.

The second day will start with

Volume 0
Open interest 35

At 11:00 Ed buys 20 contracts form Fran.

Volume 20
Open interest 55 (but still reported as 35 for the rest of the day.

At 1:30 Andy sells the 25 contracts he bought the previous day to George

Volume 45
Open interest 55 (but still reported as 35 for the rest of the day).

Open interest did not change because existing contracts were sold so no new contracts were created.

There are no other trades for the option that day.

The third day will start with

Volume 0
Open interest 55.

At 9:45 Cathy sells the 10 contracts she bought the day before to Fran.

Volume 10
Open interest 45 (but still reported as 55 for the rest of the day).

Since both the buy and the seller were closing positions, those contracts no longer exist and open interest is decreased by the number of contracts.

At 12:30 George informs his broker that that he wants to exercise the 25 contracts he owns. The actual exercise/assignment process does not take place until after the market has closed so this has no impact on volume or open interest for the day. However, the next day those contracts will no longer exist, so open interest will be decreased by 25 contracts the next day.

The fourth day will start with

Volume 0
Open interest 20.

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Both volume and open interest are an indication of how actively the option is traded. More actively traded options may provide you with a better chance of bettering the market makers quotes when you trade the option. Some traders consider that an important part of their trading decisions. Others, including me, do not. (Even though I do not use this technique, I do believe it has some value.)

There are other traders who look for spikes in volume on an option and use it as an indication that someone is capitalizing on inside information. These traders may then try to piggyback on that trade. Like all other option strategies, it works sometimes and fails miserably other times. It is not a strategy I have every tried, nor is it one that I recommend.

There are probably about a zillion other ways different traders use volume and/or open interest. Most of those techniques are, IMHO, roughly equivalent to the use of ouija boards.

Answer 4

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Answer 5

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Answer 6

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Answer 7

It actually means the number of people who are interested in buying that equity/option at any given time.

Answer 8

It means how many persons contract in particular stock. exmple; 100 in open interest, it means 100 contract there.(1 buy and 1 sell = 1 open interest, 100 open interest means100 person selling stock and the same time 100 person buying the same stock|) to be find out postive or neagtive ref web site: www.kannafutures.com in detail.

Answer 9

2

Answer 10

Open interest is a measure of open positions in a particular commodity.
i.e. 1,000,000 open interest indicates 1,000,000 long contracts. Open interest decreases as positions are closed via a sell.