Definition
Open interest represents the total number of option contracts that remain open (not exercised, closed, or expired). It increases when new positions are created and decreases when positions are closed. High open interest indicates liquidity and active trading in that contract.
Example
If a $100 call has 5,000 open interest, there are 5,000 contracts outstanding. This suggests good liquidity for trading.
FAQ
What is Open Interest?
The total number of outstanding option contracts that have not been settled.
Why is Open Interest important?
Open Interest helps investors evaluate options and make more informed decisions.