What is open interest?
What is open interest?

Chapter 1

What is open interest?

Open interest is the total number of outstanding contracts that are held by market participants at the end of each day. Open interest measures the total level of activity into the futures market, or any other derivative market; for an underlying asset, like Nifty or similar indices or F&O stocks. The quotes given above show us on

September 23, 2022 | Nifty futures has an open Interest of 1,40,75,700.

It is important to understand that number of long futures, as well as number of short futures, is 1,40,75,700. This is because total number of long futures will always be equal to total number of short futures.

Only a single side of contracts is considered while calculating/ mentioning open interest.

On September 22, 2022, the open interest in Nifty futures was 1,37,14,850.

This means that there is an increase of 360850 in the open interest on September 23, 2022 from September 22, 2022. The level of open interest helps in indicating the depth in the market.

Long Position

The total outstanding/unsettled buy position in a contract is called “Long Position”. For instance, if Mr. X buys 10 contracts of Nifty futures then he would be long on 10 contracts of Nifty futures. If Mr. Y buys 2 contracts of Reliance futures then he would be long on 2 contracts of Reliance futures. So, then the open positions of X and Y are 10 contracts of Nifty futures and 2 contracts of Reliance futures respectively. The dynamics of Nifty open interest, of futures, hence computed enables traders to develop insights into the driving forces of the financial markets.

Short Position

The total outstanding/ unsettled sell position in a contract is called “Short Position”. For instance, if Mr. X sells 10 contracts of Nifty futures then he would be short on 10 contracts of Nifty futures. If Mr. Y sells 4 contracts of Reliance futures then he would be short on 4 contracts of Reliance futures.

Open Position

Outstanding/ unsettled either long (buy) or short (sell) position in various derivative contracts is called “Open Position”.

For instance, if Mr. X shorts say 10 contracts of Infosys futures and longs say 4 contracts of Reliance futures, he is said to be having open position, which is equal to short on 10 contracts of Infosys and long on 4 contracts of Reliance.

If next day, Mr. X buys 4 Infosys contracts of same maturity, his open position would be – short on 6 Infosys contracts and long on 4 Reliance contracts.

We shall learn more about the approach to open interest analysis which would enable traders to be more data-driven than intuition based.

Note: For every Long open position in a derivative contract, there exists a counter-party or a short position in that same derivative contract, giving rise to an open interest of 1 (one Lot).


What does open interest indicate?

Open interest indicates the kind of participation in that particular future/option and also the number of open positions in that financial instrument.

How do you find the open interest of a stock?

Open interest of NSE stock futures can be found using the built-up tool of Quantsapp.

What is difference between open interest and volumes?

Volume is the total transactions happening in a given period of time in a financial derivative, while open interest is the number of open or unsettled contracts in that financial derivative.

What is open interest in futures?

Open interest is the number of unsettled or non-closed contracts in the futures market.

Is Open Interest different from Volume?

Open Interest as the word suggests is the amount of interest in any derivatives instrument. It is simply the number of open positions or unsettled positions.
Let us understand with the help of an example.

There is only 1 Option available to trade
Mr. X Buys an Option, Mr. Y Sells an Option.
Volume = 1, Total OI = 1
Then, Mr. A Buys an Option, Mr. B Sells an Option. Volume = 2, Total OI = 2
Afterwards, Mr. B Buys back the Option which was earlier sold by him and Mr. X Sells his
Option, which was earlier bought by him. Now, Volume = 3 but Total OI = 1, as the positions which were open of Mr. B and Mr. X were unwound.
This is how the computation of open interest is different from volume. The above example illustrates and highlights the needful. If this is the normal activity, then each day there will be
Volume = 3
OI will be 1 More
After 20 days of Trading
Day’s Volume will be same 3
But Open Interest or OI will be 20 X 1 = 20.
So, open interest is actually a running total of unsettled contracts till the expiry of that instrument.