Derivatives
What is Open Interest (OI)?
Open interest is the total number of outstanding derivative contracts (futures or options) that haven't been settled, it measures market participation and conviction.
Formula
OI increases when a new buyer AND new seller enter the market. It decreases when existing positions are closed.
How to Interpret
Rising OI with rising price = strong bullish trend. Rising OI with falling price = strong bearish trend. Falling OI = trend weakening. Max Pain (strike with highest OI) often acts as a magnet for expiry-day prices.
Typical Ranges
Track OI changes at key strike prices. Unusual OI buildup signals institutional positioning.