Open interest (OI) is the total number of outstanding F&O contracts that have been opened and not yet closed. It counts positions still alive in the market right now (money still committed to a contract) which makes it different from volume, which merely counts trading activity.
How does a trade change open interest?
Every F&O contract has exactly one long (buyer) side and one short (seller) side. OI counts these open pairs. Whether a trade raises or lowers OI depends on whether the two sides are opening new positions or closing old ones.
Take a Kaveri Motors futures contract where OI is currently 1,000 lots:
- Rahul buys 1 lot as a fresh position, and the seller on the other side is also opening fresh. A brand-new pair exists. OI rises to 1,001.
- The next day Rahul squares off. If his buyer is also closing an existing short, one pair disappears. OI falls back to 1,000.
- If instead Rahul sells his lot to Sunita, who is opening a fresh long, the position has just changed hands. OI stays at 1,000. Same contract, new owner.
So OI rises only when new positions are created on both sides, falls only when both sides close, and stays put when a position merely passes from one trader to another.
How is OI different from volume?
This is the classic beginner mix-up, so here it is side by side:
| Open interest (OI) | Volume | |
|---|---|---|
| Counts | Contracts still open | Contracts traded today |
| Resets daily? | No, carries forward | Yes — starts at zero every morning |
| Rahul buys, then squares off the same day | Unchanged at day's end | +2 trades counted |
| Tells you | How much money is still committed | How actively the contract changed hands today |
A contract can print huge volume with flat OI. That's positions churning hands intraday. It can also show rising OI on modest volume. Fewer trades, but fresh commitments being built and carried.
Why do traders watch OI at all?
OI is a footprint of participation. Rising OI in a futures contract means fresh positions are being added, new conviction entering, on one side or the other. Falling OI means traders are packing up — positions being unwound. Read alongside price, these shifts form the standard "buildup" interpretations covered in What is OI buildup. Long buildup, short buildup and unwinding?
In options, OI per strike also shows where positions are concentrated. Strikes with heavy OI attract attention as areas of significant existing commitment. You'll see OI as a column beside every strike when you open an option chain; see How do I read an option chain?
One caution: OI tells you that positions exist, never why. A rise in call OI could be aggressive buying, hedging by an institution, or heavy writing by sellers. The number itself doesn't take sides.
Things to keep in mind
- OI counts open contracts, not traders and not shares, and every contract has both a long and a short, so OI is never "bullish" or "bearish" by itself.
- Compare OI with volume: high OI with thin volume can mean stale positions and poor liquidity when you want to exit.
- OI-based readings are interpretation conventions, not predictions. They describe positioning, not where price goes next.
- Derivatives built on OI signals still carry full F&O risk; see What are the risks of trading Futures and Options (F&O)?
Read next
What is OI buildup — long buildup, short buildup and unwinding? — Open interest read alongside price tells you what the crowd is doing.