Open interest.

In plain English

Open interest counts the contracts that exist at the end of a trading day, rising when a trade creates a new position and falling when a trade closes one out. It is reported once a day, after the clearing organization tallies the previous session. Volume and open interest measure different things: volume counts every contract traded that day, including trades that only passed a position from one holder to another. A strike with large open interest usually has tighter bid-ask spreads and easier exits, because more participants already hold that contract. Open interest that builds steadily at one strike shows where positions are concentrated, not which way anyone is betting.

01Why it matters

Thin open interest means a contract can be hard to get out of at a fair price, which is a cost that shows up only when someone tries to exit.

02The math, step by step

A strike shows 50 contracts of volume today and open interest rising from 400 to 430. That means most of the day's trading closed existing positions and only about 30 contracts were genuinely new. Volume alone would have suggested more fresh activity than actually happened.

Illustrative example. The amounts here are hypothetical, chosen to show how the math works, not real quoted rates or figures.

03What this is NOT

04Receipts

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