Jul '25 • 💬 General discussion
Open Interest can be a powerful indicator
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
0:05
3
3 comments
Open Interest can be a powerful indicator
skool.com/tge-free-4382
A community for serious traders who want to learn how to be profitable trading stocks/options
Leaderboard (30-day)
1
+26
2
+8
3
+7
4
+4
5
+3
Powered by