How to read open interest
- Author
- CRYPTO PORT Editorial
- Published
- Updated
- Reading time
- 5 min
In short
Open interest is the total number of derivative contracts still outstanding. It shows how much positioning has accumulated, but not whether that positioning leans long or short. It is also a different quantity from volume, which is easy to confuse.
Key points
- The total of contracts left open
- A stock, not a flow — different from volume
- It does not reveal long/short skew
- Changes have several possible causes
Definition
The number of futures or options contracts that remain open, having been neither closed out nor settled. Longs and shorts always match, so it is conventionally counted on one side.
Volume counts how many times contracts changed hands over a period; open interest counts how many are still open right now. Trading one contract ten times a day builds volume, but if it is closed by the end, open interest is unchanged. One is turnover, the other is a balance.
Rising open interest means new positioning has entered the market. Whether that is new longs or new shorts cannot be read from the number, since every contract pairs a long with a short. The increase says only that someone bought and someone sold.
Sharp falls are equally ambiguous. Participants may have closed out voluntarily, or cascading liquidations may have wiped positions away. Telling them apart requires liquidation data and price action alongside it. Open interest describes a state; it does not explain a cause or a direction.
Watch out for
- · 'Rising open interest means upward pressure' does not hold
- · Some venues report contracts, others notional value; aggregating needs care
- · Notional open interest moves with price even when contract counts do not