The number of option or futures contracts currently outstanding and not yet closed, exercised, or expired.
Open interest counts positions, not trades. It rises when a new buyer and a new seller create a contract and falls when both sides close. Unlike volume, it updates once a day.
High open interest means a liquid strike with tighter spreads. Large open interest at a strike near expiration also feeds theories about price pinning there.
Example: the $50 call shows open interest of 15,000 while the $52.50 call shows 300. The $50 strike is where the market is; the $52.50 will have a wider bid-ask-spread and worse fills.
Original diagrams for the ideas on this page. Illustrative, not real market data.
The bid-ask spread. Buy orders sit below, sell orders above, and the gap between the best bid (50.01) and best ask (50.04) is the spread you pay to cross. Bar length shows the size resting at each price.Buying a call: payoff at expiry. A 105-strike call bought for 3 loses that whole 3 if the price finishes at or below 105, breaks even at 108, then gains a dollar for every dollar higher. The loss is capped at the premium; the upside is not capped.
Educational only, not advice. Spotted an error? Post in Site Feedback.