If you've ever wondered why your "perfect" setup had no follow-through, this may help. What is open interest? It’s the total number of option contracts that are currently open—not yet closed, exercised, or expired. Think of it as a running tally of how much participation there is in a contract. How it changes: • New contract opened = open interest goes up by 1 • Contract closed = open interest drops by 1 • Contract transferred = no change Simple, but revealing. 🔄 Open Interest vs. Volume These are not the same: • Volume: Contracts traded today • Open Interest: Contracts that remain open High volume but low open interest? Lots of intraday churn. Rising open interest? Positions are being held. 💡 Why does open interest matter? 1️⃣ Liquidity – Higher OI = tighter spreads, easier entries/exits 2️⃣ Sentiment – Rising OI shows traders are building positions 3️⃣ Confirmation – Price + OI rising together often means stronger trends ⚠️ Common Mistake: Trading options with low open interest. These contracts: • Have wider bid-ask spreads • Fill slower • Can stall out even if the underlying stock moves Always check OI before entering a trade. ✅ How to use open interest effectively: • Filter for liquidity – avoid illiquid strikes • Look for confirmation – rising OI + price move = conviction • Watch for exhaustion – falling OI after big moves can signal reversals