Futures For You by Dan O’Neil OPEN INTEREST AND WHAT IT SAYS What is open interest and what can it tell me about a market? Open interest is the total number of futures or options on futures contracts that have not yet been offset or fulfilled by delivery. Open interest is an indicator of the depth or liquidity of a market, which influences the ability to buy or sell at or near a given price. Because good and timely fills can be hard to obtain in illiquid markets, many traders see very low open interest in a market as a reason to steer clear. As an analysis tool, changes in open interest can be used to help confirm technical signals, helping traders gauge how much money is flowing into or out of a given market. This is helpful when looking at a trending market. If open interest is increasing, then the trend will probably continue in its present direction, either up or down. And if open interest is declining, this can be interpreted as a signal that the current trend may be about to end. |
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