What is Open Interest in Options?

Open Interest (OI) is the total number of outstanding options contracts that have not been closed, exercised, or expired. For example, 

• Suppose 1,000 new option contracts are created and remain open.
• Now, the open interest is 1,000 contracts. 
• If some of these positions are closed later, OI decreases.

Traders may realise that OI is different from volume:

Usually, several traders examine changes in OI along with price movements of the underlying asset. Looking at both can provide clues about whether market participation is increasing or decreasing. As per general market understanding, there could be the following scenarios

• Price Rises + OI Rises: New positions may be entering as prices rise.
• Price Falls + OI Rises: New positions may be entering as prices fall.
• Price Rises + OI Falls: Existing short positions may be getting closed.
• Price Falls + OI Falls: Existing long positions may be getting closed.

However, these combinations do not prove why traders are entering or exiting positions. OI and price are therefore used as “supporting data” rather than as a market signal.

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