Related Tutorial On Technical Analysis

Market CycleSteps To Start TradingTechnical AnalysisStock Analysis
Support and ResistanceFuturesOptionsPrice and Volume
Highs and LowsTrends  

Open Interest And Volume In Futures And Options

Related Tutorial On Technical Analysis

Options BasicOptions TypesOptions PlayersWhy Options
Binary OptionsOptions AdvantagesOptions Moneyness0ptions Terminology
Implied VolatilityOptions Strategies  

Open Interest and Volume
Two very interesting volume figures that helps to gauge the mood of the traders for futures and options. They are

Volume: Volume is total number of shares or contracts traded on any trading day for future or options. The higher the volume the more conviction market has in the direction of the stock. In trending market if stocks moves with volume then it means that trend is strong and similarly if the movement is sudenly reverse with high volume then a reversal is on the cards.

Open Interest (OI): While volume is just the history, stocks future direction is indicated by open Interest. In futures and option world, it is the cumulative open contracts for the stock.

Open Interest = New Open Contracts (plus) Unclosed Contracts (minus)Closed contracts

Important points related to Open Interest
1.Higher Open Interest means more Money is coming in the market.
2.Increase in OI with stock movement in direction of trend means strengthening of trend.
3.If open Interest drops significantly near highs then reversal is signalled.
4.If open interest increase with change in direction of stock, then strong reversal is expected. 5.Breakout with High open Interest means a strong break out.
6.Open Interest acts supporting indicator to other indicators.
Increase in open Interest in uptrend signifies strength in the market and decrease in open interest means trend is weakening.

Total Comments 5

User Comments
Posted by Guest
Posted on: 26-Feb-2017
Very good explanation... Thanks. Simple and easy.

Posted by kdr
Posted on: 16-Sep-2016
How we will know longs and shorts formation by open interest and price change?

Posted by Guest
Posted on: 28-Nov-2014
under decrease in future interest for expiry 24-12-14 you are showing open interest on 27-11-14 is higher than previous day.

Posted by Admin
Posted on: 07-Jul-2014
Thanks Kannan for taking time to give feedback.

Site Admin

Posted by kannan
Posted on: 06-Jul-2014
The basics given are very useful TKS

(All analysis is based on End of Trade day's Value. Expected time of update is between 5 to 5.30 PM exchange time Zone)

All Rights Reserved By Mintnovate Market Research Pvt Ltd.