Open Interest and Volume
Definition
Open Interest (OI, 持倉量 / 未平倉合約量) is the number of option contracts still alive and unsettled at this moment. Every contract needs a long and a short to exist; it stays in OI until both sides are closed out.
Volume (成交量) is how many times a contract traded today. OI is the stock of positions; Volume is the flow.
| Volume | OI | |
|---|---|---|
| How it is counted | Sum of all matched trades | Net unclosed positions |
| Update frequency | Real-time, trade by trade | Next day, after exchange settlement |
| After the close | Resets to zero | Carries forward |
| What it means | How busy the strike was today | How much position is still open |
Both sides of one trade count once, not twice — a matched buy and sell adds +1 to Volume, not +2.
Core Ideas
The rule that moves OI
Only the open/close status of both counterparties matters:
| Buyer’s action | Seller’s action | Effect on OI |
|---|---|---|
| Buy to Open | Sell to Open | +1 — a new contract is created |
| Buy to Open | Sell to Close (existing holder) | 0 — the old position changes hands |
| Buy to Close (existing holder) | Sell to Open | 0 — the old position changes hands |
| Buy to Close | Sell to Close | −1 — the contract is extinguished |
Shorthand: both opening → OI up. Both closing → OI down. One opening, one closing → OI flat (just a transfer).
Worked example: a future trades 1,000 lots today. 600 are new-long vs new-short (OI +600); 400 are old-long closing vs old-short closing (OI −400). Settled OI change is +200, but Volume still prints 1,000.
Options compute OI separately for every strike and every expiry.
Order-ticket vocabulary
US broker interfaces (IBKR, Robinhood, TD Ameritrade) make you pick the open/close intent explicitly:
| Chinese | English | Ticket |
|---|---|---|
| 買進開倉 | Buy to Open | BTO |
| 賣出開倉 | Sell to Open | STO |
| 買進平倉 | Buy to Close | BTC |
| 賣出平倉 | Sell to Close | STC |
Every one of these adds +1 to Volume. Only the pairing decides OI.
Who actually contributes OI
- Institutions and hedge funds — the bulk of OI. They buy far-dated puts as insurance on multi-billion equity books, or systematically sell calls for premium. Holding periods of weeks to months make them the ballast under the large OI numbers on the chain.
- Market makers — passive carriers. They take the other side because no natural counterparty exists, but they hate holding overnight and flatten or delta-hedge before the close. Market-maker positions left in OI are usually leftovers they could not clear.
- Retail — the volatility, not the base. A retail day trade contributes zero OI. Only overnight holds show up in the next day’s number.
OI is published with a lag
The exchange (OCC for both single-name and index options such as SPX/NDX) computes OI after the close and publishes it before the next open. The “today’s OI” you see is really yesterday’s settled value. Hence the desk saying: Volume leads, OI confirms the next day.
Around quad witching or a large expiry, OI can jump sharply. That is mechanical roll-off, not a flow signal.
Reading Volume >> OI with the T+1 method
When a strike prints Volume far above yesterday’s OI (say Volume 10,000 vs OI 1,000), large money concentrated on that strike. To find out what it did, compare today’s Volume against tomorrow morning’s new OI:
| Today | Tomorrow’s new OI | Read |
|---|---|---|
| Volume >> OI | Jumps by roughly the Volume | Positions were opened and held overnight — new money took real risk. OTM calls → accumulation ahead of an expected move up; OTM puts → shorting, or hedging a large equity book |
| Volume >> OI | Flat or lower | Either closing (profit-taking or capitulation, contracts extinguished) or pure intraday churn / hand-off. No one carried risk overnight — the signal is void |
Intraday guess before the data arrives: watch where prints land relative to the quote. Heavy trading at or above the ask means buyers are lifting aggressively — the signature of Buy to Open. Heavy trading at or below the bid means sellers are hitting hard — often Sell to Close.
The honest limit
OI tells you how much position is still open. It does not tell you who opened it, whether they are long or short, or whether they are institutional or retail. Every directional read on top of OI needs a separate tool to cross-check — which is exactly the gap Gamma Exposure and Dealer Positioning fills with a structural assumption.
Relationships
- Gamma Exposure and Dealer Positioning — GEX takes published OI per strike and multiplies it by Gamma to infer dealer hedging
- Options Greeks — Delta and Gamma are the per-contract sensitivities that OI scales into a market-wide exposure
- Market Microstructure — OTC and Dark Pools — the venue and dealer/market-maker structure behind the flow
- Options Strategies — covered calls, collars, and protective puts are the position types that build the large institutional OI
- Trading & Finance