Open Interest

In simple terms

Open interest is the total number of active bets or contracts that haven't been closed yet. Think of it like counting how many unfinished games are happening at a casino right now—the higher the number, the more active trading is occurring.

Definition

Total number of outstanding derivative contracts.

In depth

Open interest represents the aggregate number of outstanding derivative contracts (futures, options, perpetuals) that remain unsettled on an exchange at any given time. Each new contract opened increases open interest by one, while each contract closed or settled decreases it by one. High open interest indicates substantial liquidity and market participation in that contract, which typically correlates with tighter bid-ask spreads and reduced slippage for traders. Open interest is a key metric for assessing market depth and can signal whether price movements are driven by new participants entering positions or existing participants closing positions.

How does Open Interest work?

Open interest counts the total number of derivative contracts that are currently open and not yet closed or settled, quoted either in contracts or in notional value. Every contract has a long side and a short side, so one open contract is counted once, not twice. When a new buyer and a new seller open opposite sides, open interest rises. When both parties close out, it falls. When one trader simply passes a position to another, ownership changes hands but open interest is unchanged, which is why it moves independently of trading volume.

An example

A contract has 10,000 units of open interest when two new traders open opposite sides of 500 contracts, lifting it to 10,500, in illustrative figures. Later an existing long sells to a brand-new buyer: the position transfers, so open interest stays at 10,500 even though volume was recorded. When 200 contracts are then closed by both original parties, open interest falls to 10,300.

Figures are illustrative only.

What beginners get wrong

• Open interest and volume measure different things, and heavy volume can occur while open interest stays flat as positions change hands.
• Rising open interest shows more capital committed to a market, not the direction of that capital or where price will go.
• Comparing open interest figures across exchanges without converting them to a common notional unit produces numbers that mean very little.

Related terms

• Perpetual Futures
• Funding Rate
• Futures Market
• Leverage Cascade
• Squeeze
• Volume
• Institutional Adoption

Part of

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